A I N S W O R T H G A M E T E C H N O L O G Y
A N N U A L R E P O R T 2 0 1 6
LAS VEGAS
SYDNEY
FT. LAUDERDALE
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its new
In 2016, following its motto, 'Experience Counts' Ainsworth
talented and experienced game
announced
development team in Australia to strengthen its global
leadership. The combination of such exceptional leadership
from Ainsworth has positioned us well for the next stage of
growth and set the bar even higher in providing innovative
products.
Furthermore, with the construction of the state-of-the-art Las
Vegas 291,000sq ft facility, Ainsworth continues to build its
Las-Vegas based R&D and game design teams as well as
legal and executive staff.
Another highlight for FY15/16 was the completed acquisition of
South-Carolina based Nova Technologies LLC. This purchase
provided us with an immediate presence in Class II market
and growth within the Americas.
RESULTS
ANNOUNCEMENT
FOR SIX MONTHS
ENDING
31ST DECEMBER 2016:
TUESDAY
21ST FEB 2017
Dates may be subject to change
RESULTS
ANNOUNCEMENT
FOR YEAR ENDING
30TH JUNE 2017:
TUESDAY
29TH AUG 2017
Dates may be subject to change
ANNUAL
GENERAL
MEETING:
TUESDAY
15TH NOV 2016
Dates may be subject to change
NOTICE OF ANNUAL
GENERAL MEETING
Ainsworth Game Technology Limited
ABN 37 068 516 665
Notice is hereby given that the 2016 Annual
General Meeting of the members of Ainsworth
Game Technology Limited will be held at:
Bankstown Sports Club
“Georges River Room”
8 Greenfield Parade
(Cnr Greenfield Parade and Mona Street)
Bankstown NSW 2200
on Tuesday 15 November 2016 at 11:00am
NEW AND RELAUNCHED A600® BRANDS
CONTENTS
2016 Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Chairman’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Directors’ Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Chief Executive Officer’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Shareholder Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Lead Auditor’s Independence Declaration . . . . . . . . . . . . 84
Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Corporate Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
In accordance with ASX Listing Rule 4.10.3, Ainsworth Game Technology’s Corporate Governance Statement
can be found on its website at: http://www.agtslots.com.au/corporategovernance
01
ANNUAL REPORT 2016 2016 Highlights
Performance Highlights
Continued strong growth in international businesses validates the execution of a clear strategy to improve quality
of recurring earnings and strong growth and profitability in international markets.
North America
• Revenue and segment profit up by 34% and 29% respectively.
• Growth in Game Operations installed base to 2,792 units (+112% increase) - included are 1,511 units from
acquisition of Nova Technologies, LLC.
• Strong A560SL™ sales, 3,559 total units sold (+15% versus pcp).
• Continuing growth in existing markets - California, Canada, Louisiana and Wisconsin.
• Maintained strong ASP in competitive market.
• Nova Technologies, LLC acquisition provides entry into Class II markets and strong complementary fit to the
existing business.
Latin America
• Revenue and segment profit up by 49% and 68% respectively.
• Growth in Game Operations installed base to 1,794 units (+37% increase) with Mexico and Peru having the
largest gains in install base.
• Yield increased to USD$19 (+27% increase).
• 2,923 total units sold (+32% versus pcp).
• Mexico, the largest market in region for the Company, representing 32% of units sold.
• Strong penetration in Argentina, representing 24% increase of unit sales.
• Continued growth in the Caribbean markets.
Australia
• Challenging period for volume and revenue growth given highly competitive market conditions and minimal
corporate and casino sales.
• 3% increase in ASP despite competitive domestic market.
• Sustainable growth in machines placed under service in NSW/ACT to 15,001 (14,059 pcp).
Other Regions
• Strong sales revenue (+25%) and unit volume growth (+19%).
• Driven by good contribution from SkyCity Auckland and sales into South Africa (new market).
• Good pipeline of further sales within Asia (e.g. Tiger Resorts).
Online
• Real Money Gaming – Successful integrations with platforms: Microgaming Ltd, NYX and iSoftbet.
• Social Gaming – Second social casino, King Spin™ Slots App, was successfully launched in conjunction with
616 Digital LLC. Continued strong performance of previously established social casino, Players Paradise™
Slots App. New content licensing agreements with Zynga and Playstudios/MGM Resorts.
02
AINSWORTH GAME TECHNOLOGY AGT’s balance sheet is in a strong
position and provides the Company
with significant flexibility and capacity
to drive earnings growth into the future.
Financial Highlights
REPORTED NPAT of $56 million (2015: $70 million)
NPAT excluding FOREX gains of $52 million, flat on pcp
EPS of $0.17 per share (2015: $0.22 per share)
Reported EBITDA down 11% to $96 million
EBITDA excluding FOREX gains up 11% to $91 million
R&D as percentage of revenue at 10% (2015: 11%)
STRONG Balance Sheet, Cash Position and Cash Flow and ROE
TOTAL DIVIDENDS of 10.0 cents per share (fully franked)
representing a payout ratio of 58%
Interim Dividend
5.0 cents
100% Franked
(Paid 2 May 2016)
Final Dividend
5.0 cents
100% Franked
(Payable 7 November 2016)
HISTORICAL PERFORMANCE - AUD (M)
Normalised PAT (All FY's- excl foreign currency gain)
Domestic Revenue
International Revenue
Net Profit After Tax (NPAT) excluding foreign exchange effects
*Note: Normalised net profit for FY12 excludes
one off recognition of $21.8 in deferred tax assets
285.5
204.0
244.1
100.8
240.6
147.6
143.3
61.0
93.0
52.5
81.5
52.4
198.1
73.7
124.4
50.2
150.6
47.5
103.1
45.9
REVENUES - AUD (M)
(Fiscal years ended June 30)
H1
H2
122.3
128.7
CAGR
10%
143.6
101.6
96.5
121.8
111.9
141.9
FY13
FY14
FY15
FY16
EBITDA - AUD (M)
(Fiscal years ended June 30)
H1
H2
57.3
39.7
CAGR
7%
42.0
42.3
31.9
49.7
50.3
53.8
FY13
FY14
FY15
FY16
NPAT - AUD (M)
(Fiscal years ended June 30)
H1
H2
35.8
25.9
35.7
34.6
30.2
22.0
CAGR
2%
22.6
33.1
FY13
FY14
FY15
FY16
REVENUE/PROFITABILITY - AUD (M)
(Fiscal years ended June 30)
Profit Before Tax (PBT) excluding foreign exchange effects
Total Revenue
244.1
285.5
240.6
150.5
66.4
FY13
81.2
68.8
70.4
FY14
FY15
FY16
R&D EXPENDITURE PERCENTAGE (M)
(Fiscal years ended June 30)
Total R&D Expenditure
R&D as a Percentage of Revenues
23.2
12%
26.4
25.4
11%
11%
28.6
10%
FY12*
FY13
FY14
FY15
FY16
FY13
FY14
FY15
FY16
03
ANNUAL REPORT 2016
Chairman’s Report
Dear Shareholders,
I am pleased to report our FY16 results. They reflect
continuing progress toward achieving our long term
strategy and delivering the anticipated benefits to
shareholders.
and with the delivery of the expected synergies
with Novomatic, we are confident we will increase
the Company’s revenues and profitability
from
international markets.
Total sales for FY16 were $285.5m, a 19% increase.
Net profit after tax for the year ended 30 June 2016
was $55.7m down 21% on FY15. However prior to
accounting for changes in foreign exchange rates
and items outside of our normal business activities,
underlying EBITDA came in at $95.2m, a pleasing rise
of 12%. This shows the true underlying performance
of the business and illustrates our momentum.
Our strategy has been to expand and diversify our
offerings to the global gaming market. We have and
continue to develop a broader, more creative and
differentiated product portfolio allowing Ainsworth to
enter more diverse markets, increase market share
and grow revenue. I am pleased to say that in 2016
we have established foundations for further growth
and continue to execute on these goals.
international
revenues
Since 2011, Ainsworth's
have grown from $23.3m to $204.0m. Compared
to last year they were up by a further 38%. These
international revenues now account for 71% of group
revenue. Ainsworth is now positioned to continue
to build on strategies to expand its international
presence. We needed to operate in larger markets.
We wanted to leverage our technology and game
expertise into bigger opportunities. The Americas
was our number one focus. I'm pleased to say our
businesses in the Americas have grown strongly with
a further 40% growth in revenues this year.
We expect our international revenues to continue to
grow. With new hardware, games, the contribution
from Nova that we acquired in January and is going
very well, the new facility in Las Vegas that is now
operating giving Ainsworth a greater presence
04
Nova Technologies was an important acquisition for
Ainsworth. Nova gave us an immediate entry into
the complementary Class II gaming markets in the
US. Since then we have successfully integrated the
business. It made a good contribution to our results
in the second half of the year. It also pushed us
further along in delivering the other key leg of our
strategy, which is to increase the number of units
on participation, which with recurring revenues,
improves the quality of our earnings. There are further
opportunities to leverage Nova's technology into
new markets and provide an increased contribution
in recurring revenues from products on gaming
operation.
We also made continued progress in Latin America.
This is another exciting region for us. Sales grew
by 49%, another strong result from this region
reflecting the continued high performance of our
range of products. While Mexico is our largest market
representing 32% of units sold in the region, we also
sell across a broad range of countries including the
Caribbean, Argentina, Peru, Uruguay and Colombia
where we also saw good growth.
How do we consistently perform so well in these
markets? Game performance is clearly important, the
supply chain too, and our ability to deliver and service
quality products. But we should not underestimate
the value of relationships and tenure. As ever, at
Ainsworth, experience counts. We have operated
in Latin America for a long time. We anticipated the
growth early and built the foundations properly.
We are seeing the benefits of that foresight and
planning.
AINSWORTH GAME TECHNOLOGY "Throughout FY17 the
Board and Management
are focused on
continuing to build
a stronger, more
diversified and profitable
global gaming and
technology Group."
Domestic markets are very competitive. Revenues
were down by 12% on FY15. However, I am confident
that, through our innovative game development we
have a solid strategy for recovery in market share,
revenues and profitability over time given the recent
changes implemented.
To enable Ainsworth to continue to deliver on its
growth strategy, the Group maintains a strong balance
sheet. Our current assets exceed our current liabilities
of $48m by more than four times. And our new Las
Vegas facility and the Nova acquisition increased
our non-current assets by almost 80% to $227.9m.
We have significant headroom in our debt facility
to fund growth and remain conservatively geared
particularly given the quality of our cash flows.
Despite operating a conservative balance sheet we
generated a very healthy return on equity of 18%.
Let me now turn to the most significant event of FY16
and a relationship that can shape our future. On June
27 this year, shareholder approval was granted for
me, and the entities that I control, to sell 172 million
shares to Novomatic AG. On behalf of my fellow
directors, management and staff, we are delighted to
welcome Novomatic to Ainsworth. Other regulatory
approvals and the licensing process are proceeding
to enable the completion of this transaction.
Novomatic is a highly regarded and successful
international gaming company with an extensive library
of games and technologies. There are undoubtedly
significant synergies that can be developed through
this relationship. We detailed those synergies in
the Notice of Meeting. They are intact and we have
already made progress in exploring their game library
and cooperating in the key North American market.
We look forward to making further progress on these
fronts in FY17 and delivering these synergies to the
benefit of all shareholders.
With this strong performance and our confidence in
the future, I am pleased to report that the Board was
able to declare a fully franked dividend of 10 cents
per share for the full year. The dividend represents a
58% payout ratio, recognising we clearly remain in the
investment and growth phase in our development.
We remain firmly committed to building and delivering
value for all shareholders.
Throughout FY17
the Board and Management
are focused on continuing to build a stronger,
more diversified and profitable global gaming and
technology Group. We expect FY17 to be an exciting
and prosperous year for Ainsworth as we develop
and deliver new products to our customers and
players.
I am encouraged by the achievements of the Group
to date and would sincerely like to thank the hard
work and effort of our Board of Directors, our CEO
Mr Danny Gladstone and our CFO Mr Mark Ludski
who both did an outstanding job through the year,
the rest of the highly capable and effective executive
team, along with the invaluable contribution of
our loyal and dedicated employees, my fellow
shareholders and valued customers.
Len Ainsworth
Executive Chairman
05
ANNUAL REPORT 2016 Chief Executive Officer’s Report
Dear Shareholders,
I am pleased to report that 2016 was another year of
progress for AGT.
Starting with the results for the year ended 30 June
2016, AGT has achieved a stable profit performance.
Group revenues were up by 19% versus FY15 to
$285.5m. Gross profit increased by 13% and gross
margins remained consistent through the year at 60%.
Pleasingly, prior to accounting for foreign currency
gains, and items outside of our normal business
activities, underlying EBITDA came in at $95.2m, a rise
of 12%.
Currency gains contributed $4.7m in FY16 compared
to $25.6m in the prior year. Prior to these gains
underlying PBT was up 2% in FY16. After tax, FY16
had a foreign currency gain of $3.3m. This was much
smaller than the significant $17.9m benefit in FY15.
Accordingly prior to including foreign currency gains
NPAT was effectively unchanged. This was a stable
result given the transition in our business.
Operating costs, excluding cost of sales, financing
costs and other expenses were $100.4m, an overall
increase of 21% on FY15. This increase was primarily
due to a lift in sales, service and marketing expenses
resulting from the full year impact of previous and
additional placement of products under gaming
operation, additional sales/technical representation
within the Americas and the integration of costs through
the completed acquisition of Nova Technologies LLC
(Nova) in the period.
(R&D) costs were
Research and development
maintained at 10% of revenue. This
investment
drives innovation and Ainsworth’s superior game
performance. The R&D program has created the
A600™ where commercialisation continues in targeted
markets with a broader and more diverse range of
games, and the release of the new A640™ hardware
configuration within the Americas.
06
Including these investments we delivered an 18%
return on equity and we finished the year in a strong
financial position with a conservative balance sheet.
Importantly, the FY16 results demonstrate our ability
to execute our clear strategy to take our gaming
expertise and proprietary technology and build
a strong, profitable and successful international
business.
We are determined to build a significant business in
large international markets, particularly the Americas.
We seek to leverage our proprietary technology
and gaming expertise to substantially increase our
profitability. We focus on improving the quality of
our earnings by developing a larger participation
business that provides recurring revenues. We
continue to invest in multiple new licenses and their
related markets to ensure our ongoing growth and
sustainability. And we continue to develop our online
and social gaming businesses to build a presence in
these new markets. In FY16 we made progress on all
these fronts.
Our
international business performed well with
revenues growing by 38%. As Len Ainsworth said,
international revenues now account for 71% of the
group total. Indeed, around 68% of our segment
profits now come from the Americas. Within this, our
North American revenue grew by 34% last year. We
generated $111.0m of sales in the year. Profit grew
by 29%. We sold 15% more units at 3,559 and held
average selling prices flat at US$16,700.
The continued high performance achieved
on the A560SL™ with game brands such as
Mustang Money 2™, Thunder Cash™, Twice The
Money™ and Cash Cave™ made the Group’s product
an attractive value proposition across all established
and new markets. All of our main brands perform at
an average index of 1.0 to 2.2 times of house average.
AINSWORTH GAME TECHNOLOGY Chief Executive Officer’s Report
We now have a broad presence across North
America. We have strong presence in some states
and significant scope for growth. Encouragingly,
we saw ongoing growth in existing markets led by
California, Canada, Louisiana and Wisconsin. And we
enjoyed a good contribution from new territories that
we added in previous periods.
in
the Americas
Headcount
increased by 50
employees compared to FY15. We increased sales,
service, production and support resources and in line
with our strategy - we built up a dual creative and
design team over there. This team works closely with
the Australian team in developing and accessing
new technologies. We find this is a productive way to
leverage, rather than duplicate resources.
Nova Technology is another important part of our
growth strategy in the US. With Nova included, we
finished the year with 2,792 units on participation.
That represents an increase of 112%. We have fully
integrated Nova’s Class II products into popular
Ainsworth hardware. This is being well received in
the market. Nova also has licenses to sell in 11 states
and over 58 jurisdictions.
to
leverage
Importantly, we can continue
this
technology platform and we have strategies in place
to enter new markets to drive further growth. Nova
has 35 Class II titles available now. Next year we
will have 42 titles. Ainsworth has 10 titles but this is
growing strongly, and next year we should have 28.
This will take our total up from 45 titles at present to
70. This will drive our momentum and growth.
Let’s turn now to Latin America. This is another
high-performing region for us. Sales grew by 49% and
profits reflecting our operational gearing, increased
by 68%. We sold 2,923 units, up by 32% on the prior
year and average selling prices increased by 1% to
US$15,500.
"Nova Technology is
another important part
of our growth strategy
in the US. With Nova
included, we finished
the year with 2,792
units on participation.
That represents an
increase of 112%."
Mexico is our largest market in the region. It represents
32% of units sold. Argentina is also an important
market for Ainsworth. It represented 24% of unit sales
in the period, up from 8% in FY15. We sell across a
range of other countries including the Caribbean,
Peru, Uruguay and Colombia where we also see
good growth.
To complement these unit sales, we have an installed
base of 1,794 machines which represents an increase
of 37% over last year.
It is worth noting that the working capital payment cycle
is longer in Latin America and with a high base of units
on participation, the business is more capital intensive.
Notwithstanding these factors, these are great results.
The Rest of the World segment was a story of strong
growth. Other international revenue comprising Asia,
New Zealand, South Africa and Europe contributed
$18.2 million, an increase of 25% compared to FY15.
Profit was 18% higher. We sold over a thousand units
in this region in the year. The increase in revenue
was primarily attributable to sales growth within New
Zealand which increased revenue by 127% through a
significant order for SkyCity Auckland and sales into
South Africa within the current period.
FY16 was clearly a challenging period for volumes,
revenues and margins in Australia. We operate in a
highly competitive market with an effective market
leader. We saw minimal corporate and casino sales in
the year together with general changes in customer
purchasing patterns. When we were selling far more
machines back in 2014 these customer bases added
significant volumes. They were largely absent for us
last year.
Whilst ship-share came under pressure, high-yielding
product performance ensured that the installed base
of Ainsworth products still experienced moderate
growth across most domestic markets.
07
ANNUAL REPORT 2016 Chief Executive Officer’s Report (continued)
Despite the vendor market being highly competitive
and concentrated, on the positive side, our ASP’s
increased by 3% to AU$21,300. Our machines are
advanced and perform well and we maintain pricing
discipline. Additionally, we increased the number of
machines we service in NSW.
Our service base increased by 7% to over 15,000
machines. Servicing
interesting business
is an
for us as it provides us intelligence on market
developments, technical issues, quality control and
we gain direct feedback from customers. This is also
recurring income generating $6.6m during the year.
Domestic margins were adversely impacted due to
product mix changes, higher initial material costs on
new products, A$ currency changes and competitive
pressures across the gaming industry. Our new
machine, the A600, is also costly to manufacture
given some of its advanced componentry is priced in
USD and initial production runs are small. Initial cost
reduction initiatives have now been implemented,
and with expected growth in sales volumes and
production efficiencies, as well as a greater
concentration of premium progressive games, these
impacts should be reduced.
So what are we going to do to remedy this decline in
Australia?
First, I am confident that the release of a range of new
games and concepts on the technically advanced
A600™ at the Australasian Gaming Exhibition in
August 2016 has been well received and should
provide the positive momentum to improve domestic
results – both revenue and profitability.
To support further product development, we have
opened up our organisational structure, promoting
greater creativity. It is making a difference. We have
engaged with recognised external game consultants
with good track records.
08
We have commenced the process to sift through
Novomatic’s significant game
to find a
‘diamond in the rough” that we could adapt and make
available to Ainsworth’s markets.
library
Online is another element of our new model.
investments
The strategic
in Real Money and
social platform technology should provide further
opportunities to leverage Ainsworth’s recognised
brands to a greater number of users through social
and mobile channels. Successful integrations have
been achieved with leading Real Money gaming
platforms: Microgaming Ltd and iSoftbet. Ten games
have been provided for initial launch on these
platforms and early performance is encouraging.
Ainsworth opened its second social casino, King
Spin™ Slots App. This was successfully launched in
conjunction with 616 Digital LLC on Android and iOS.
The synergy between Ainsworth and 616 Digital has
been reflected in the ongoing strong performance of
the Players Paradise™ Slots App. Further growth and
progress can be expected.
We have achieved these results and developed these
growth strategies on our own. Now we are moving
towards the next stage of our development with,
subject to completion, our new major shareholder,
Novomatic.
Novomatic is a highly regarded and successful
international gaming company with an extensive
technologies. There are
library of games and
undoubtedly significant synergies
that can be
developed through this relationship. We detailed
those expected synergies in the Notice of Meeting
and Explanatory Statement provided to shareholders.
They are intact and we have already made progress
in exploring their game library and cooperating in
the key North American markets. We look forward to
making further progress on these fronts in FY17 and
delivering synergy benefits, through our results, to all
shareholders.
AINSWORTH GAME TECHNOLOGY Chief Executive Officer’s Report (continued)
We expect continued growth in our international
businesses in FY17. Sales in the Americas
continue to grow. Strong contributions from
new jurisdictions and the opening of our new
facility in Las Vegas have lifted our presence in
these markets and are expected to positively
impact performance in coming periods.
Our strategy is to improve our share, revenue
and profitability in domestic markets and I am
very encouraged by the quality of the innovation
that is now occurring in our business. This is a
lead indicator and bodes well for our future
performance.
We have made good progress to date in
the expected synergies with
delivering
Novomatic in FY17. This strategic relationship
will assist us to become a more diversified game
technology business with improving quality of
earnings and strong growth and profitability.
I wish to express my appreciation to the
Chairman for his commitment to the Company.
I would also like to thank the Board of Directors
for their wise counsel, our talented employees
for their major contribution to our continued
success, our loyal and supportive shareholders
and importantly our customers for whom we
strive to deliver the best in gaming experiences.
Danny Gladstone
Chief Executive Officer / Executive Director
09
ANNUAL REPORT 2016 INFORMATION ABOUT SHAREHOLDERS
Shareholder
the Australian
Securities Exchange Limited Listing Rules and not disclosed
elsewhere in this report is set out below:
required by
information
SHARE HOLDINGS (AS AT 8 SEPTEMBER 2016)
Number of shareholders and shares on issue
The issued shares in the Company were 327,716,274
ordinary shares held by 7,088 shareholders.
Substantial shareholders
The number of shares held by substantial shareholders and
their associates are set out below:
Shareholder
Mr LH Ainsworth
Votraint No. 1019 Pty Ltd
(MCA Private Investment A/C)
Number of
Ordinary Shares
176,008,132*
Distribution of shareholders
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
NUMBER OF EQUITY
SHAREHOLDERS
Ordinary
Shares
Performance
Rights
1,604
3,327
1,092
995
70
7,088
5
276
65
41
2
389
The number of shareholders holding less than a marketable
parcel of ordinary shares is 351 (35,129 ordinary shares).
29,371,617
On market buy-back
There is no current on market buy-back of ordinary shares.
* Included in shareholding above of Mr LH Ainsworth are
172,100,823 ordinary shares which are subject to a proposed
sale to Novomatic AG as approved at a General Meeting of
Shareholders held on 27 June 2016. The completion of this
share sale transaction requires necessary gaming regulatory
approvals as detailed in the Notice of Meeting dated 4 May
2016.
Voting rights
Ordinary shares
The voting rights attaching to ordinary shares are that on
a show of hands every member present in person or by
proxy has one vote and upon a poll, each share shall have
one vote.
Options and Performance Rights
Option and performance right holders have no voting rights.
Unquoted equity securities
At 8 September 2016, 2,806,640 performance rights
have been issued to 389 employees, respectively. These
performance rights remain unexercised.
Regulatory considerations affecting shareholders
The Company is subject to a strict regulatory regime in regard
to the gaming licences and operations within the gaming
industry. It is necessary for the Company to regulate the
holding of shares to protect the businesses of the Company
in respect of which a gaming licence is held. By accepting
shares, each potential investor acknowledges that having
regard to the gaming laws, in order for the Company to
maintain a gaming licence, the Company must ensure that
certain persons do not become or remain a member of
the Company. The Constitution of the Company contains
provisions that may require shareholders to provide certain
information to the Company and the Company has powers
to require divesture of shares, suspend voting rights and
suspend payments of certain amounts to shareholders.
10
Shareholder InformationAINSWORTH GAME TECHNOLOGY Twenty largest shareholders
Name
MR LH AINSWORTH
VOTRAINT NO 1019 PTY LTD
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
ASSOCIATED WORLD INVESTMENTS PTY LTD
BACLUPAS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
RBC INVESTOR SERVICES AUSTRALIA PTY LIMITED
NATIONAL NOMINEES LIMITED
WRITEMAN PTY LIMITED
BNP PARIBAS NOMS PTY LTD
UBS NOMINEES PTY LTD
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
CASOLA HOLDINGS PTY LTD
MR CHRISTIAN JOHN HASTINGS AINSWORTH
MR SASHA ALEXANDER CAJKOVAC
MS PATTAWADEE SMARNKEO
TRINITY MANAGEMENT PTY LTD
MR DAVID WARREN LARMENT & MRS CHIZURU LARMENT
Number of ordinary
shares held
161,227,861
29,37 1 ,61 7
16,003,382
15,778,322
13,643,664
9,884,656
4,759,697
4,082,456
3,478,216
3,259,935
2,9 1 1 ,622
1,792,570
1,295,8 1 7
1,096,278
1,070,000
7 70,650
690,000
684,999
682,037
660,000
Percentage
of total
49.20
8.96
4.88
4.81
4.1 6
3.01
1.45
1.25
1.06
0.99
0.89
0.55
0.40
0.33
0.33
0.24
0.21
0.21
0.21
0.20
Total
273,143,779
83.34
11
ANNUAL REPORT 2016 The directors present their report together with the consolidated financial statements of the Group comprising of
Ainsworth Game Technology Limited (the Company) and its subsidiaries for the financial year ended 30 June 2016 and the
auditor’s report thereon.
1. DIRECTORS
The directors of the Company at any time during or since the end of the financial year are:
Name, qualifications
and independence status
CURRENT
Age
Experience, special responsibilities and other directorships
Mr Leonard Hastings Ainsworth, DUniv,
FAICD, FAIM
Executive Chairman
93 yrs
– Sixty four years gaming industry experience
– Founder and former Managing Director of Aristocrat
– Fellow of the Institute of Company Directors in Australia and the
Australian Institute of Management
– Life member – Clubs NSW
– Founder of Australian Gaming Machines Manufacturers Association –
now Gaming Technology Association
– Founder of Australasian Gaming Exhibition
– Inducted into the Australian Gaming Hall of Fame and U.S Gaming Hall
of Fame in 1994 and 1995, respectively
– Recognition as export hero in 2002 by Australian Institute of Export
– G2E Asia Gaming Visionary Award Recipient in 2010
– Recipient of Clubs NSW award for outstanding contribution to the club
industry in 2011
– Recipient of Keno and Club Queensland Award for excellence in March
2014 for services to industry
– Awarded Higher Doctorate degree by the University of New South
Wales
– Director and Chairman since 1995 – Executive Chairman since 2003
– Graeme has specialised in the area of liquor and hospitality for over
30 years in corporate consultancy services with particular emphasis on
hotels and registered clubs
– Former Chairman of Harness Racing NSW, recipient of J.P. Stratton
award and Ern Manea Gold Medal. Inducted into the Inter Dominion
Hall of Fame in February 2014
– Former Director of Central Coast Stadium and Blue Pyrenees Wines
– Director of Liquor Marketing Group Limited (Bottle Mart) since
September 2013
– Chairman of Lantern Hotels Group since 30 June 2016
– Chairman of Audit Committee of Illawarra Catholic Club Group,
Director since 2007
– Chairperson of Audit Committee, member of Regulatory and
Compliance Committee, Member of Remuneration and Nomination
Committee since 31 March 2015
– Lead Independent Non-Executive Director since 2013
Mr Graeme John Campbell
Lead Independent Non-Executive Director
59 yrs
12
Directors’ Reportfor the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Name, qualifications
and independence status
CURRENT
Mr Michael Bruce Yates B.Com (with merit),
LLB
Independent Non-Executive Director
Mr Colin John Henson, Dip Law- BAB,
FCPA, FGIA, FAICD
Independent Non-Executive Director
68 yrs
Age
Experience, special responsibilities and other directorships
62 yrs
– Michael has extensive commercial and corporate law experience in a
career spanning over 35 years
– He is a former senior corporate partner of Sydney Law practices
Holding Redlich and Dunhill Madden Butler and has acted for a number
of clients involved in the gaming industry
– Director since 2009
– Chairperson of Regulatory and Compliance Committee
– Member of Audit Committee
– Member of Remuneration and Nomination Committee until 23 February
2016
– Colin has had a lengthy career in senior corporate positions and as a
director of private and publicly listed companies across a broad range
of industries
– Lead associate with Madison Cross Corporate Advisory Pty Ltd,
effective 2 July 2014
– Former directorships (in recent years) include; Executive Chairman
of Redcape Property Fund Limited, an ASX Listed Property Trust;
Chairman and non-executive director of Videlli Limited and QuayPay
Limited
– Fellow of the Australian Institute of Company Directors, Fellow of
CPA (Certified Practising Accountants) Australia and Fellow of the
Governance Institute of Australia. Colin is also a non-practising
member of the Law Society of NSW
– Director since 2013
– Member of Audit Committee
– Chairman of Remuneration and Nomination Committee
Ms Heather Alice Scheibenstock
GAICD
Independent Non-Executive Director
48 yrs
– Heather has extensive leadership experience within the gaming and
hospitality industries specialising in strategic planning and offshore
growth spanning over 30 years
– She has previously held senior executive roles at Echo Entertainment
and Solaire Group
– Director of Southern Metropolitan Cemeteries Trust
– Member of Australian Institute of Company Directors and Women on
Boards
– Appointed Director (subject to regulatory approval) on 18 January 2016
– Member of Remuneration and Nomination Committee since
23 February 2016
Mr Daniel Eric Gladstone
Executive Director and Chief Executive
Officer
61 yrs
– Danny has held senior positions within the gaming industry over a
successful career spanning 40 years
– Inducted into the Club Managers Association Australia Hall of Fame
in 2000
– Chairman of Gaming Technologies Association from 2011 until
resignation on 21 February 2012
– Chief Executive Officer since 2007 - Executive Director since 2010
– Member of Regulatory and Compliance Committee
13
Directors’ Report (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 2. COMPANY SECRETARY
Mr Mark L Ludski has held the position of Company Secretary since 2000. Mr ML Ludski previously held the role of Finance
Manager with another listed public company for ten years and prior to that held successive positions in two leading accounting
firms where he had experience in providing audit, taxation and business advisory services.
Mr ML Ludski is a Chartered Accountant holding a Bachelor of Business degree, majoring in accounting and sub-majoring in
economics.
3. DIRECTORS’ MEETINGS
The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each
of the directors of the Company during the financial year are:
Director
LH Ainsworth
GJ Campbell
MB Yates
DE Gladstone
CJ Henson
HA Scheibenstock
Board Meetings
B
A
10(1)
12
12
12
12
6
12
12
12
12
12
7
Audit Committee
Meetings
Remuneration
& Nomination
Committee Meetings
Regulatory
& Compliance
Committee Meetings
A
–
2
2
–
2
–
B
–
2
2
–
2
–
A
–
3
2
–
3
1
B
–
3
2
–
3
1
A
–
4
4
4
–
–
B
–
4
4
4
–
–
A Number of meetings attended
B Number of meetings held during the time the director held office during the year
(1)
Mr LH Ainsworth was excluded from two meetings held during the year due to his conflict of interest in dealing with the resolution at
the General Meeting of Shareholders to sell ordinary shares held by him to Novomatic AG.
In addition to the above directors’ meetings a special purpose Transaction Committee was formed in February 2016, to
manage all matters in relation to the shareholders meeting to approve the acquisition of 172,100,823 ordinary shares held by
Mr LH Ainsworth and entities controlled by him, by Novomatic AG. The Transaction Committee held seven (7) meetings during
the year and comprised of all independent non-executive directors of the Company.
4. PRINCIPAL ACTIVITIES
The principal activities of the Group during the course of the financial year were the design, development, production, lease,
sale and servicing of gaming machines and other related equipment and services. The Group continues to execute strategies
to expand and diversify its product offerings within both land based and on-line gaming markets, including social gaming and
licensed “Real Money” gambling markets.
There were no significant changes in the nature of the activities of the Group during the year.
Objectives
Ainsworth is a leading gaming machine developer, designer and manufacturer operating in local and global markets. Our
strategy is to profitably and sustainably expand this footprint by leveraging off our deep expertise and substantial experiences
for the benefit of all shareholders.
The Group’s objectives are to:
– focus on increasing revenue and profitability within geographical markets that are expected to achieve the greatest
contributions to the Group’s financial results, and creation of sustained growth;
– diversity and expansion of contributions from recurring revenue through units under gaming operation;
– expand presence within on-line gaming markets, including social gaming and licensed “Real Money” gambling markets;
– continue investing in product research and development in order to provide quality market leading products that are innovative
and entertaining, and result in increased player satisfaction and therefore greater venue profitability;
– provide a growing return on shareholder equity through increasing profitability, payment of dividends and share price growth;
and
– prudently manage levels of investment in working capital and further improve cash flow from operations to facilitate investment
in growth opportunities.
14
Directors’ Report (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY In order to meet these objectives the following priority actions will continue to apply in future financial years:
– grow the Group’s footprint and operating activities in domestic and international markets;
– continual investment in research and development to produce innovative products with leading edge technology;
– review and evaluate growth opportunities both organically and through acquisitions;
– further reduce product and overhead costs through improved efficiencies in supply chain and inventory management;
– actively pursue initiatives to improve and reduce investment in working capital;
– maintain best practice compliance policies and procedures and increase stakeholder awareness of the Group’s regulatory
environment; and
– ensure retention and development of the Group’s talent base.
5. OPERATING AND FINANCIAL REVIEW
Overview of the Group
The Group’s profit for the year ended 30 June 2016 was a profit after tax of $55.7 million, a decrease of 21% on the $70.4 million
in 2015. The profit after tax excluding effect of net foreign currency gains was $52.4 million which is in line with the $52.5 million
on the same basis in 2015.
This result was achieved on revenue of $285.5 million, an increase of 19% on the revenue of $240.6 million in 2015. Further,
revenue gains in the key market of the Americas have assisted in increasing the contribution of revenue from international
markets from 61% in 2015 to 71% in the current year. The current year result included a positive impact for net foreign currency
gains of $4.7 million compared to $25.6 million in 2015 as a result of $US currency movements and the related translation of US
denominated assets at the reporting date.
Underlying EBITDA for FY16 was $95.2 million, an increase of 12% compared to $85.1 million on the same basis in FY15.
During the current year the Group incurred significant items outside the ordinary course of the business of $4.1 million. These
expenses included evaluating strategic investment opportunities, impairment of a prior period receivable where payments had
fallen into arrears and leasehold/rental expenses for vacated premises in North America until the expiry of the lease following
completion of the Group’s new facility in Las Vegas.
The following table summarises the results for the year:
In millions of AUD
Total revenue
Underlying EBITDA
Reported EBITDA
EBIT
Profit before tax
Profit for the year
Total assets
Net assets
Earnings per share (fully diluted)
Total dividends per share
12 months to
30 June 2016
12 months to
30 June 2015
Variance
%
285.5
240.6
95.2
95.8
72.8
75.1
55.7
436.0
315.9
85.1
107.6
91.3
94.4
70.4
348.6
280.5
17.0 cents
22.0 cents
10.0 cents
10.0 cents
18.7
11.9
(11.0)
(20.3)
(20.4)
(20.9)
25.1
12.6
(22.7)
–
15
Directors’ Report (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 5. OPERATING AND FINANCIAL REVIEW (continued)
A reconciliation of the reported EBITDA to the underlying EBITDA is shown in the following table:
In millions of AUD
Reconciliation:
Profit before tax
Net interest
Depreciation and amortisation
Reported EBITDA
Foreign currency gains
Due diligence costs on strategic opportunites/acquisitions
Impairment losses
Accelerated expenses for vacated premises in North America
12 months to
30 June 2016
12 months to
30 June 2015
Variance
%
75.1
(2.3)
23.0
95.8
(4.7)
1.2
2.2
0.7
94.4
(3.1)
16.3
107.6
(25.6)
1.9
1.2
–
(20.4)
(25.8)
41.1
(11.0)
(81.6)
(36.8)
83.3
100.0
11.9
Underlying EBITDA
95.2
85.1
The information presented in this review of operations has not been audited in accordance with the Australian Auditing
Standards.
Shareholder returns
2016
2015
2014
2013
2012
Profit attributed to owners of the company
$55,703,000 $70,353,000 $61,570,000 $52,202,000 $64,275,000
Basic EPS
Dividends paid/declared
Change in share price
$0.17
$0.22
$0.19
$0.16
$32,245,000 $32,227,000 $32,211,000
$9,661,000
($0.41)
($1.17)
($0.29)
$1.93
$0.23
$–
$1.74
Net profit amounts for 2012 to 2016 have been calculated in accordance with Australian Accounting Standards (AASBs). The
profit amount for 2012 included an income tax benefit of $18.1 million following the recognition of previously unrecognised
deferred tax assets.
Investments for future performance
The Group continues to review and evaluate opportunities within the gaming sector. Further investments in research
and development will assist the ongoing expansion and breadth of innovative, technically advanced and consistently
high performing products. The Group launched the A600™ at the Australasian Gaming Exhibition (AGE) in August 2015 with the
on-going release in targeted international markets in FY17. This product was the result of the significant investment in research and
development undertaken in prior periods and is a cornerstone of the Group’s product transition strategies in all global markets.
The Group continues to execute strategies within on-line segments, both real money and social gaming. Completion of
licenced “Real Money” gambling technical integration of the Group’s Remote Gaming Server (RGS) “GameConnect™” has
progressed. Registrations are continuing with leading real money gambling operators within Europe, as well as selected
Asian and South American markets, where real money on-line gaming is regulated.
Entry into the high growth social gaming sector was initially established through an initial investment with 616 Digital LLC. The
Group has converted this investment to a 40% equity shareholding in 616 Digital LLC subsequent to the reporting date. An
option exists to purchase the remaining 60% of 616 Digital LLC. After evaluation of the financial due diligence and technical
performance of 616 Digital LLC within FY16, exercise has been deferred for a twelve month period.
As part of the Group’s strategic investment in 616 Digital LLC, the Company launched its new on-line casino “Players Paradise
Slots™” in February 2015 to complement 616 Digital LLC’s already established Pokie Magic on-line casino. The development
and marketing of 616 Digital LLC’s social gaming offering on both desktop and mobile platforms, has been leveraged and
enhanced by Ainsworth’s extensive land based game content library.
16
Directors’ Report (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Significant changes in the state of affairs
The completion of the acquisition of Nova Technologies LLC in January 2016 has allowed access to the Class II gaming markets
previously not open to the Company. The purpose built facility in Las Vegas was completed in the current financial year. This
new high profile facility positions the Group to capitalise on the significant opportunities and operating efficiencies within this
region.
The recent approval by shareholders of the sale of ordinary shares held by Mr LH Ainsworth and entities controlled by him to
Novomatic AG is expected to provide significant revenue opportunities and synergies in coming periods and provide access
to new research and development capabilities for the Group’s global markets. Management has already started to examine
opportunities to leverage Novomatic’s product library and extensive infrastructure.
Other than the matters noted above, there were no significant changes in the state of affairs of the Group during the financial
year.
Review of principal businesses
Results in the current period and prior corresponding period are summarised as follows:
In millions of AUD
Segment revenue
Australia
Americas
Rest of World
Total segment revenue
Segment result
Australia
Americas
Rest of World
Total segment result
Unallocated expenses
Net foreign currency gains
R&D expense
Corporate expenses
Other expenses
Share of profit of equity-accounted investee
Total unallocated expenses
Less : interest included in segment result
EBIT
Net interest
Profit before income tax
Income tax
Profit after income tax
12 months to
30 June 2016
12 months to
30 June 2015
Variance
Variance
%
81.5
185.8
18.2
285.5
29.0
83.3
10.0
122.3
4.7
(28.6)
(19.8)
(3.4)
0.4
(46.7)
(2.8)
72.8
2.3
75.1
(19.4)
55.7
93.0
133.0
14.6
240.6
46.6
58.3
8.5
113.4
25.6
(25.4)
(18.6)
(1.9)
–
(11.5)
52.8
3.6
44.9
(17.6)
25.0
1.5
8.9
(20.9)
(3.2)
(1.2)
(1.5)
0.4
(20.3)
(26.4)
(1.8)
91.3
3.1
94.4
(24.0)
70.4
(1.0)
(18.5)
(0.8)
(19.3)
4.6
(14.7)
(12.4)
39.7
24.7
18.7
(37.8)
42.9
17.6
7.8
(81.6)
12.6
6.5
78.9
100.0
130.0
55.6
(20.3)
(25.8)
(20.4)
(19.2)
(20.9)
17
Directors’ Report (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 5. OPERATING AND FINANCIAL REVIEW (continued)
Key performance metrics
Segment result margin
Australia
Americas
Rest of World
Segment result margin
R&D expense
EBIT(1)
Profit before income tax (excluding net foreign currency gains)
Profit after income tax
Effective tax rate
(1) Excludes net foreign currency gains of $4.7 million (2015: $25.6 million)
% of revenue
Variance
12 months to
30 June 2016
12 months to
30 June 2015
Points
35.6
44.8
54.9
42.8
10.0
23.9
24.7
19.5
25.8
50.1
43.8
58.2
47.1
10.6
27.3
28.6
29.2
25.4
(14.5)
1.0
(3.3)
(4.3)
(0.6)
(3.4)
(3.9)
(9.7)
0.4
Revenue
Sales revenue of $285.5 million was recorded in the year under review compared to $240.6 million in 2015, an increase of
19%. Strong revenue growth in international markets helped to offset weaker domestic revenue as changes are progressively
implemented on new game development initiatives. The revenue contributions from domestic and international markets were
29% and 71% respectively compared to 39% and 61% in 2015.
The domestic markets of Australia generated revenues of $81.5 million during the reporting period, representing a reduction
of 12% as compared to 2015. This reduction was experienced across most jurisdictions. It resulted from a number of factors,
including a decline in business activity with large corporate customers, competitor activity as relates to product placements
and some pricing pressure. Notwithstanding these factors, consistent and high-yielding performance from the broad range
of established Ainsworth products ensured that the installed base still experienced moderate growth across most domestic
markets.
During the reporting period, the transition between the A560™ cabinet to the new A600™ cabinet, was successfully achieved
across all major jurisdictions. Whilst this affected average selling prices and volumes to some degree, the impact was confined
to 2016. Business activity in the primary markets of New South Wales and Queensland during the reporting period was solid
following the launch of the new A600™ cabinet. However with the launch of a range of innovative new games at the Australasian
Gaming Exhibition in August 2016, expectations are positive for the domestic business in FY17. The NSW hotels market again
proved challenging during the period although the additional focus on market-attuned concepts such as the new 243 Way
games, are forecast to provide a meaningful improvement in future periods.
In Victoria, the introduction of voluntary pre-commitment in December 2015 had some impact on the amount of capital available
to customers for the purchase of gaming machines. The efforts of Service Providers to the Victorian market to renew service
agreements with hotels and clubs also stifled demand to some degree during the reporting period. In South Australia, the
introduction of the $5 maximum bet legislation from 1 January 2017, adversely impacted business activity during the reporting
period. This also represents an opportunity for additional business activity in FY17, due to the expected rotation on a large
number of non-compliant machines.
In line with the strategy to expand Ainsworth’s offshore operations, international revenue was $204.0 million compared to
$147.6 million in 2015, an increase of 38%. The key growth market of the Americas increased revenue by 40% in the period
through the continued product performance of the A560SL™ in North America and the contribution of a Class II gaming product
through the Nova Technologies acquisition.
The Americas now constitutes 65% ($185.8 million) of total revenues, up from 55% ($133.0 million) in the prior corresponding
period. The Group expects to achieve further increases in international revenue in FY17 from the ongoing release of newly
developed hardware and games, combined with the completion of the established operational bases in Las Vegas, Nevada
and Florida.
18
Directors’ Report (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY The key market of the Americas contributed 91% of total international revenue, with North America and Latin America
representing 60% and 40% respectively. Pleasingly, the North American market realised revenue of $111.0 million in the current
period, an increase of 34% on the $82.7 million in 2015. The continued high performance of the A560SL™ within North America
provided additional revenue opportunities with game brands such as Sweet Zone™ and Gold Awards Series™, among others.
The previous granting of licenses and the progression of product approvals in additional US States contributed to further
revenue growth in the current period. The relatively new markets of Louisiana, Maryland, New York and Wisconsin contributed
to 21% of total unit sales from North America compared to 4% in the previous corresponding period in 2015.
Further revenue growth was achieved in the established markets of California where unit sales grew by 24% compared to 2015.
Additional unit sales were achieved through the Group’s East Coast distributor in the current period.
In conjunction with the revenue increase from outright sales the Group maintained a consistent base of gaming units under
participation arrangements in the reporting period. At the reporting date the Group had 1,281 units under gaming operations
excluding Class II and III products through the recent Nova Technologies (Nova) acquisition in North America, a decrease of
35 units from those at the start of the financial year. The successful acquisition of Nova provided an additional 1,511 units under
gaming operation at the reporting date. The release of new hardware such as the A640™ as a dedicated participation product
only, is expected to further increase the installed base of products under participation in this market.
Revenue from Latin America was $74.8 million, an encouraging increase of 49% on the corresponding period in 2015. In addition
to the above, the Group has increased its footprint and at the reporting date has 1,794 units under gaming operations in this
market. This represents an increase of 37% compared to the 1,311 units under gaming operations as at 30 June 2015. Continued
high performance of products such as the Multi Win™ multi game range and Quad Shots™, along with strategies previously
undertaken have driven the Group’s growth within this geographical region. The Company is well positioned to build on its
reputation as a provider of high performing gaming products and expects to continue to expand its established footprint of
products under gaming operation.
Revenue from other international markets (“Rest of World” segment) of New Zealand, Europe, Asia and on-line contributed
$18.2 million representing an increase of 25% compared to the prior corresponding period in 2015. These results were primarily
achieved through the Skycity Auckland shipment in the first half of FY16 contributing 29% of total revenue for this segment.
Further orders for new openings in Asia were shipped post reporting period and will be realised in the first half of FY17.
Operating costs
Gross margin of 60% was achieved for the full year FY16, which was consistent with the first half of FY16 and down from the
63% in 2015. As noted at the half year, margins within domestic markets were impacted by higher componentry costs through
product transition to the A600™, adverse currency movements, aggressive promotional initiatives and reduced corporate
and casino activity. The maintenance of gross margin was achieved through an increased contribution of international sales
and favourable currency movements in the period. Continued cost reduction initiatives combined with higher sales volumes,
production efficiencies, and a greater concentration of premium progressive recurring revenue games are expected to assist
in off-setting potential negative margin impacts. International revenues are expected to continue to increase their contribution
to total revenue of the Group.
Operating costs, excluding cost of sales, other expenses and financing costs were $100.4 million, an increase of 21% over 2015.
These costs include additional overheads following the integration of Nova into the Group’s operations for the period since
completion. This increase was primarily due to selling and marketing costs; additional sales representation in America in line
with revenue increases and new licenses achieved in the period; increased expenditure on new product initiatives and the full
year depreciation impact of the gaming machines under gaming operations. Operating costs relating to global expansion are
continually assessed to ensure these costs are aligned to the achievement of revenue growth before being incurred.
Research and development (R&D) expense was $28.6 million, an increase of $3.2 million over 2015 which represented 10% of
revenue (2015: 11%).
Administration costs were $19.8 million, an increase of $1.2 million compared to 2015. These overhead costs as a percentage
of total revenue were 7% (2015: 8%) and are consistent with prudent resource and cost control.
Financing income and costs
Net financing income was $7.0 million in the current period, a reduction of $21.7 million on the net financing income of $28.7 million
in 2015. This reduction was primarily a result of lower foreign exchange gains of $4.7 million compared to $25.6 million in 2015,
an unfavourable change of $20.9 million.
19
Directors’ Report (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 Review of financial condition
Capital structure and treasury policy
The Company currently has on issue 327,716,274 ordinary shares. The Board continues to ensure a strong capital base is
maintained to enable investment in the development of the business. Group performance is monitored to oversee an acceptable
return on capital is achieved and dividends are able to be provided to ordinary shareholders in future periods. There were no
changes in the Group’s approach to capital management.
The Group is exposed to foreign currency risks on sales and purchases that are denominated in currencies other than AUD.
The Group regularly monitors and reviews the financial impact of currency variations to determine strategies to minimise the
volatility of changes and adverse financial effects in foreign currency exchange rates. No hedging arrangements were utilised
in the current period and draw-downs of US dollar denominated borrowings were utilised to assist in providing a partial natural
hedge against future movements.
Cash flows from operations
The Group continues to generate positive cashflows from operating activities. Net cash inflows from operations for the year
ended 30 June 2016 was $52.9 million, an increase from $20.2 million in the corresponding period in 2015. It is expected that
increased cashflows will be achieved within the first half of FY17 as the cash conversion of receivables and inventory reductions
occur through sales.
Liquidity and funding
In addition to cash and term deposits held of $26.4 million (2015: $41.3 million), the Group has in place a $90 million facility with
a leading Australian bank. This facility will allow the Group to pursue traditional financing alternatives, including the ability to
minimise working capital investment through cash reserves and ability to utilise US dollar borrowings.
The Group utilised borrowings under its established facility to fund the acquisition of Nova Technologies. The net debt ((debt
less cash)/EBITDA) at the reporting date was 0.43 times which was considered within an acceptable range of gearing for the
Group.
The cash used in investing activities included payments to complete Nova Technologies LLC acquisition in January 2016 and
investment in new facilities in Las Vegas and Florida.
The Group actively monitors its working capital requirements and has increased its investment particularly through the entry
into Class II gaming products enabling it to increase machines under gaming operation and provide a greater proportion of
recurring revenue in the Americas under participation arrangements.
Impact of legislation and other external requirements
The Group continues to work with regulatory authorities to ensure that the necessary product approvals to support its
operations within global markets are granted on a timely and cost effective basis. The granting of such licenses will allow the
Group to expand its operations. The Group aims to conduct its business worldwide in jurisdictions where gaming is legal and
commercially viable. Accordingly, the Group is subject to licensing and other regulatory requirements of those jurisdictions.
The Group’s ability to operate in existing and new jurisdictions could be adversely impacted by new or changing laws or
regulations and delays or difficulties in obtaining or maintaining approvals and licenses.
6. DIVIDENDS
The following dividends were declared by the Company for year ended 30 June 2016:
Declared and paid during the year 2015
Final 2015 ordinary (franked)
Interim 2016 ordinary (franked)
Total amount
Cents
per share
Total amount
$’000
Date of
payment
5.0
5.0
16,117
29 September 2015
16,128
32,245
2 May 2016
20
Directors’ Report (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Declared after end of year
The dividends have not been provided and there are no income tax consequences. After the balance sheet date the following
dividend was declared by the directors.
Final ordinary (franked)
Total amount
Cents
per share
Total amount
$’000
Date of
payment
5.0
16,386
7 November 2016
16,386
The financial effect of this dividend has not been brought to account in the consolidated financial statements for the year ended
30 June 2016 and will be recognised in subsequent financial reports, and there are no income tax consequences.
Dividends have been dealt with in the financial report as:
- Dividends
- Noted as a subsequent event
Note
19(c)
$’000
32,245
16,386
7. EVENTS SUBSEQUENT TO REPORTING DATE
After the reporting date, the Company declared a franked dividend of 5.0 cents per ordinary share amounting to $16,386,000
with an expected payment date of 7 November 2016. The financial effect of this dividend has not been brought to account in
the financial statements for the year ended 30 June 2016 and will be recognised in subsequent financial reports.
Other than the matter discussed above, there has not arisen in the interval between the end of the financial year and the date of
this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company,
to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future
financial years.
8. LIKELY DEVELOPMENTS
The Group continues to pursue development initiatives and the necessary product approvals to help ensure sustainable
revenue growth and continued financial improvement in future periods.
Further execution of strategies through the investment in a social on-line gaming company is expected to provide complementary
revenue gains within on-line social and “Real Money” gaming segments in future periods. This strategy is aimed at achieving
increased market share in selected geographical business sectors so as to positively contribute to Group results in future
financial years.
Further information about likely developments in the operations of the Group and the expected results of those operations
in future financial years has not been included in this report because disclosure of the information would be likely to result in
unreasonable prejudice to the Group.
21
Directors’ Report (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 9. DIRECTORS’ INTERESTS
The relevant interest of each director in the shares and rights over such instruments issued by the companies within the Group
and other related bodies corporate, as notified by the directors to the ASX in accordance with S205G(1) of the Corporations Act
2001, at the date of this report is as follows:
Mr LH Ainsworth(1)
Mr GJ Campbell
Mr MB Yates
Mr CJ Henson
Ms HA Scheibenstock
Mr DE Gladstone
Ainsworth Game
Technology Limited
Ordinary shares
176,008,132
300,000
26,600
127,838
–
Performance
rights over
ordinary shares
–
–
–
–
–
51,136
400,592
(1)
Included in shareholding above of Mr LH Ainsworth are 172,100,823 ordinary shares which are subject to a proposed sale to Novomatic
AG as approved at a General Meeting of Shareholders held on 27 June 2016. The completion of this share sale transaction requires
necessary gaming regulatory approvals as detailed in the Notice of Meeting dated 4 May 2016.
10. SHARE OPTIONS/PERFORMANCE RIGHTS
Unissued shares under performance right
At the date of this report unissued ordinary shares of the Group under performance right are:
Expiry date
22 July 2018
17 March 2020
Instrument
Exercise price
Rights
Rights
$Nil
$Nil
Number of
shares
1,192,027
2,239,234
3,431,261
There are no other shares of the Group under performance right.
All performance rights expire on the earlier of their expiry date or termination of the employee’s employment. In addition, the
ability to exercise the performance rights is conditional on the Group achieving annual growth in Earnings Per Share of at least
eight per cent each year over four years and ranking according to Total Shareholder Return in the fiftieth percentile compared
to companies in the ASX300 index with the same Consumer Services GICS industry sector as the Group. Further details about
share based payments to directors and KMP are included in the Remuneration report in section 15. These rights do not entitle
the holder to participate in any share issue of the Company or any other body corporate.
Shares issued on exercise of options
During or since the end of the financial year, the Group issued ordinary shares of the Company as a result of the exercise of
options under the Employee Share Option Trust (ESOT) as follows (there are no amounts unpaid on the shares issued):
Number of shares
227,345
22
Amount paid
on each share
$0.225
Directors’ Report (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY 11. INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS
Indemnification
The Group has agreed to indemnify current and former directors of the Group against all liabilities to another person (other
than the Company or a related body corporate) that may arise from their position as directors of the Company and its controlled
entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the
Company will meet the full amount of any such liabilities, including costs and expenses.
Neither the Group nor Company have indemnified the auditor in relation to the conduct of the audit.
Insurance premiums
Since the end of the previous financial year, the Company has paid insurance premiums in respect of directors’ and officers’
liability and legal expenses’ insurance contracts, for current and former directors and officers, including senior executive
officers of the Company and directors, senior executive and secretaries of its controlled entities.
The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect
of the directors’ and officers’ liability and legal expenses contracts, as such disclosure is prohibited under the terms of the
contract.
12. NON-AUDIT SERVICES
During the year KPMG, the Group’s auditor, has performed certain other services in addition to the audit and review of the
financial statements.
The board has considered the non-audit services provided during the year by the auditor and in accordance with written advice
provided by resolution of the audit committee, is satisfied that the provision of those non-audit services during the year by the
auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for
the following reasons:
– all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed
by the audit committee to ensure they do not impact the integrity and objectivity of the audit; and
– the non-audit services provided do not undermine the general principles relating to auditor independence as set out in
APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work,
acting in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks
and rewards.
Details of the amounts paid to the auditor of the Group, KPMG, and its network firms for audit and non-audit services provided
during the year are set out below:
Services other than audit and review of financial statements:
Other regulatory audit services
Controlled entity audit
Other services
Transaction support services
Audit and review of financial statements
Total paid to KPMG
2016
$
35,000
36,077
71,077
255,000
326,077
13. LEAD AUDITOR’S INDEPENDENCE DECLARATION
The Lead auditor’s independence declaration is set out on page 84 and forms part of the directors’ report for the financial year
ended 30 June 2016.
14. ROUNDING OFF
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial / Directors’ Report) Instrument 2016/191 and in
accordance with that Instrument, amounts in the consolidated financial statements and directors’ report have been rounded off
to the nearest thousand dollars, unless otherwise stated.
23
Directors’ Report (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 Directors’ Report (continued)
for the year ended 30 June 2016
15. REMUNERATION REPORT – AUDITED
15.1 Principles of compensation – audited
Remuneration is referred to as compensation throughout
this report.
Key management personnel have authority and
responsibility for planning, directing and controlling the
activities of the Group, directly or indirectly, including
directors of the Company and other executives. Key
management personnel comprise the directors of the
Company and senior executives for the Group that are
named in this report.
Compensation levels for key management personnel of the
Group are competitively set to attract and retain appropriately
qualified and experienced directors and executives.
The remuneration and nomination committee (“RNC”)
regularly reviews market surveys on the appropriateness
of compensation packages of the Group given trends in
comparative companies both locally and internationally,
and the objectives of the Group’s compensation strategy.
In addition independent remuneration consultants are used
to advise the RNC on compensation levels given market
trends.
The compensation structures explained below are
designed to attract suitably qualified candidates, reward
the achievement of strategic objectives, and achieve the
broader outcome of creation of value for shareholders. The
compensation structures take into account:
– the capability and experience of the key management
personnel;
– the key management personnel’s performance against
individual
Indicators
Key Performance
contributions to the Group’s performance;
(KPIs) and
– the Group’s performance including:
– revenue and earnings;
– growth in share price and delivering returns on
shareholder wealth; and
– the amount of incentives within each key management
person’s compensation.
Compensation packages include a mix of fixed and variable
compensation and short-term and long-term performance-
based incentives.
In addition to their salaries, the Group also provides non-
cash benefits to its key management personnel, and
contributes
to post-employment defined contribution
superannuation plans on their behalf.
Fixed compensation
Fixed compensation consists of base compensation (which
is calculated on a total cost basis and includes any Fringe
Benefits Tax (FBT) charges related to employee benefits
including motor vehicles), as well as employer contributions
to superannuation funds.
24
Compensation levels are reviewed annually by the RNC
through a process that considers individual, segment
and overall performance of the Group. In addition market
surveys are obtained to provide further analysis so as to
ensure the directors’ and senior executives’ compensation
is competitive in the market place. A senior executive’s
compensation
reviewed on promotion and
performance.
The RNC undertook a review of fixed compensation levels
in 2016 using the review undertaken by an independent
remuneration consultant in the previous year to assist
with determining an appropriate mix between fixed and
performance linked compensation for senior executives of
the Group during the year.
is also
Performance linked compensation
Performance linked compensation includes both short-
term and long-term incentives and is designed to reward
key management personnel for meeting or exceeding their
financial and personal objectives. The short-term incentive
(STI) is an ‘at risk’ bonus provided in the form of cash, while
the long-term incentive (LTI) is provided as performance
rights over ordinary shares of the Company under the rules
of the Employee Rights Share Plans (see Note 23 to financial
statements).
In addition to their salaries, selected key sales management
personnel receive commission on sales within their specific
business segments as part of their service contracts at each
vesting date.
As outlined a review was undertaken by an independent
remuneration consultant on behalf of the RNC to determine
and assess current performance
linked compensation
arrangements - STI and LTI plans. This review was evaluated
by the Board to determine appropriate remuneration levels
taking into consideration the Group’s growth objectives,
industry specific and market considerations and related
retention of key employees.
Short-term incentive bonus
Each year the RNC determines the objectives and KPIs of
the key management personnel. The KPIs generally include
measures relating to the Group, the relevant segment, and
the individual, and include financial, people, customer,
compliance, strategy and risk measures. The measures are
chosen as they directly align the individual’s reward to the
KPIs of the Group and to its strategy and performance.
The financial performance objectives for FY16 were Group
‘profit before tax’ excluding foreign currency gains / (losses)
and any specific extra-ordinary items as assessed by the
RNC. These financial performance targets were assessed
by the RNC for all key management personnel (excluding
Mr LH Ainsworth and non-executive directors) and it was
determined that the Group did not achieve the ‘profit before
tax’ minimum target and no STI was payable in the current
year.
AINSWORTH GAME TECHNOLOGY is capable of being awarded
The non-financial objectives vary with position and
responsibility and include measures such as achieving
strategic outcomes, safety measures, and compliance with
established regulatory processes, customer satisfaction
and staff development. The non-financial objectives for key
management personnel, excluding directors (other than
Mr Danny Gladstone, the Chief Executive Officer (CEO))
were assessed however it was determined that no STI for
these criteria would be awarded in the current period as the
minimum Group ‘profit before tax’ financial target was not
achieved.
The RNC assesses the actual performance of the Group,
the relevant segment and individual against the KPI’s set
at the beginning of the financial year. A pre-determined
for
maximum amount
stretch performance. No stretch bonus was awarded as
overall performance fell below the minimum performance
established. The performance evaluation in respect of the
year ended 30 June 2016 has taken place in accordance
with this process.
The RNC recommends the cash incentive to be paid to
the individuals for approval by the board. The method of
assessment was chosen as it provides the Committee with
an objective assessment of the individual’s performance.
Based on remuneration practices the STI was determined
for key management personnel and senior executives.
Following a
independent
remuneration consultant it was established that should a
STI amount be awarded 75% of the STI would be payable
in cash and 25% be deferred for a 12 month period. The
deferred component established for the 2015 financial year
has been accrued at 30 June 2016 and is subject to service
conditions. The deferred component in the current year
represented $99,238 for key management personnel.
recommendation by
the
the performance
Currently,
linked component of
compensation comprises approximately 3% (2015: 9%)
of total payments to key management personnel due to
forfeitures under the STI during the current period.
Long-term incentive
Performance Rights Plan
During a previous year an employee incentive plan
was established whereby performance
rights were
granted under the Rights Share Trust (RST). Under the
RST, eligible employees and executives were allocated
performance rights over ordinary shares in the Company.
The performance rights were granted at nil consideration
or exercise price however are dependent on service
conditions, vesting conditions and performance hurdles.
The performance rights convert to ordinary shares of the
Company on a one-for-one basis.
Of each tranche that vest, 70% vest subject to Earnings
Per Share (EPS) targets and 30% vest subject to Total
Shareholder Return (TSR) targets. The relevant weighting
of performance conditions of 70% EPS and 30% TSR were
determined as appropriate due to the following:
– EPS
is more reflective of the Group’s underlying
performance in terms of long term sustainable growth;
– To ensure relevance of
the LTI
for
international
employees;
– International expansion requires looking beyond ASX
listed companies for a more meaningful performance
comparison;
– Inherent volatility of the gaming industry makes TSR less
relevant and reflective of underlying performance; and
– There are limited numbers of gaming industry companies
in the ASX.
25
Directors’ Report (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 15. REMUNERATION REPORT – AUDITED (continued)
15.1 Principles of compensation – audited (continued)
EPS growth is an absolute performance measure that refers to consolidated results of operating activities. Relative TSR
measures the Group’s notional return in the form of share price increases and dividends over the term against a comparison
group of companies in the ASX300 that have the same Consumer Service GICS industry sector as the Company.
The Board believes that these two performance hurdles, in combination, serve to align the interests of the individual executives
and employees with the interests of the Company’s shareholders, as EPS growth is a key driver of company long-term share
price performance, and relative TSR compared to the ASX300 comparator companies provides a comparison of the entities
performance against potential alternative shareholder investment.
Vesting on each tranche is as follows:
Tranche 1
Tranche 2
EPS growth
Vesting
outcome
Company TSR
percentile ranking
Vesting
outcome
Less than 8.0% per annum
Nil vesting
Below 50th percentile
Nil vesting
8.0% per annum
10.0% per annum
25% vesting plus 1.25% for
each 0.1% increase in EPS
50th percentile
50% vesting
50% vesting plus 2.0% for
each 0.1% increase in EPS
Between 50th and
75th percentile
Pro-rata (sliding scale)
percentage vesting
12.5% per annum or more
100% vesting
At or above 75th percentile
100% vesting
Rights that do not vest at the end of the vesting periods will lapse, unless the Board in its discretion determine otherwise. Upon
cessation of employment prior to the vesting date, rights will be forfeited and lapse. Performance rights do not entitle holder to
dividends that are declared during the vesting period. No adjustments to reported results from operating activities are made
when the remuneration committee determines whether the EPS hurdle is achieved.
Short-term and long-term incentive structure
The RNC considers that the above performance-linked remuneration structure is generating the desired outcome. The evidence
of this is:
– the growth in profits in recent years;
– the strong growth in international revenue;
– the performance-linked element of the structure appears to be appropriate because senior executives achieved a level of
performance which qualifies them for performance limited incentives; and
– the high levels of retention among senior executives and key personnel.
Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholder wealth, the RNC have regard to the following indices in
respect of the current financial year and the previous four financial years.
2016
2015
2014
2013
2012
Profit attributable to owners of the company
$55,703,000 $70,353,000 $61,570,000 $52,202,000 $64,275,000
Dividends paid/declared
Change in share price
$32,245,000 $32,227,000 $32,211,000
$9,661,000
($0.41)
($1.17)
($0.29)
$1.93
$–
$1.74
Profit is considered as one of the financial performance targets in setting the short-term incentive bonus. Profit amounts for
2012 to 2016 have been calculated in accordance with Australian Accounting Standards (AASBs).
Other benefits
Key management personnel receive additional benefits such as non-monetary benefits, as part of the terms and conditions of
their appointment. Non-cash benefits typically include payment of club memberships and motor vehicles, and the Group pays
fringe benefits tax on these benefits.
26
Directors’ Report (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Service contracts
It is the Group’s policy that service contracts for Australian key management personnel and key employees be unlimited in term
but capable of termination by either party on 12 months’ notice and that the Group retains the right to terminate the contracts
immediately, by making payment equal to 12 months’ pay in lieu of notice.
The Group has entered into service contracts with each Australian key management person that provide for the payment
of benefits where the contract is terminated by the Group. The key management persons are also entitled to receive on
termination of employment their statutory entitlements of accrued annual and long service leave, together with any accrued
superannuation.
The service contract outlines the components of remuneration paid to the key management personnel but does not prescribe
how remuneration levels are modified year to year. Remuneration levels are reviewed each year to take into account market
conditions, cost-of-living changes, any change in the scope of the role performed by the senior executive, retention of key
personnel and any changes required to meet the principles of the remuneration policy.
Mr Danny Gladstone, Executive Director and Chief Executive Officer (CEO), has a contract of employment dated 5 February
2007 and amended on 7 December 2010 with the Company. The contract specifies the duties and obligations to be fulfilled by
the CEO and provides that the board and CEO will early in each financial year, consult and agree objectives for achievement
during that year.
The CEO has no entitlement to a termination payment in the event of removal for misconduct as specified in his service contract.
Refer to Note 28 of the financial statements for details on the financial impact in future periods resulting from the Group’s
commitments arising from non-cancellable contracts for services with key management personnel.
Non-executive directors
Total compensation for all non-executive directors, last voted upon by shareholders at the 2012 Annual General Meeting, is not
to exceed $850,000 per annum, with effect from 1 July 2012. Directors’ base fees are presently $120,000 per annum (excluding
superannuation) and is set based on a review of fees paid to other non-executive directors of comparable companies. The fees
paid to non-executive directors reflect the demands and responsibilities associated with their roles and the global nature of
the operations within the highly regulated environment within which the Group operates. Fees incorporate an allowance for the
onerous probity requirements placed on non-executive directors by regulators of the jurisdictions in which the Group operates
or proposes to operate in. In addition to these fees the cost of reasonable expenses are reimbursed as incurred.
Non-executive directors do not participate in performance related compensation and are not provided with retirement benefits
apart from statutory superannuation.
The Executive Chairman, CEO and Company Secretary do not receive any additional fees for undertaking Board or Committee
responsibilities. Following a review previously undertaken by an independent remuneration consultant, non-executive director’s
fees were assessed based on current market levels for comparable companies, demands and responsibilities associated
with their roles and the global nature of the Group’s operations within a highly regulated environment to ensure the Board is
appropriately compensated. Other independent non-executive directors who also chair or are a member of a committee receive
a supplementary fee in addition to their annual remuneration. Current fees for directors, excluding superannuation and are set out
below.
POSITION
Australian resident non-executive director
Lead Independent non-executive director
Chair of Audit Committee
Chair of Regulatory and Compliance Committee
Chair of Remuneration and Nomination Committee
Member of Audit Committee
Member of Regulatory and Compliance Committee
Member of Remuneration and Nomination Committee
$
(per annum)
120,000
10,000
20,000
24,000
12,000
12,000
15,000
8,000
27
Directors’ Report (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 Directors’ Report (continued)
for the year ended 30 June 2016
15. REMUNERATION REPORT – AUDITED (continued)
15.1 Principles of compensation – audited (continued)
In addition to the above fees a special purpose Transaction Committee (TC) was formed in the current period to review all
requirements of the General Meeting of Shareholders held on 27 June 2016 for the approval of the sale of ordinary shares held
by Mr LH Ainsworth and entities controlled by him to Novomatic AG. The TC met seven (7) times during the current period and
these additional services were considered to be outside the current remuneration for independent non-executive directors. An
additional one-off fee was paid of $20,000 to the Chairman, being the lead independent non-executive director and $15,000
to each independent non-executive director as members for their services on the TC.
Services from remuneration consultants
The RNC, comprising of independent non-executive directors only, secured the services of an independent remuneration
consultant (Remuneration Strategies Group Pty Ltd) to consider compensation levels for the participation by the non-executive
directors on the TC. RSG stated that it was normal and acceptable practice for the members of the TC to receive an additional
fee for the services provided. An assessment by RSG confirmed the fees noted above were reasonable and relatively moderate
given the significant responsibilities undertaken by the TC. This review by the independent remuneration consultant was
assessed and confirmed by the RNC and Board and a total of $1,850 was paid during the year for this service.
The Board made its own inquiries and reviewed the processes and procedures followed by the remuneration consultant during
the course of their assignment to ensure that they were satisfied that any remuneration recommendations are made free from
undue influence.
The Board’s inquiries included a summary of the way in which the remuneration consultant carried out any work, details of any
interaction with non-executive directors in relation to the assignment and other services, and further questions in relation to
the assignment.
28
AINSWORTH GAME TECHNOLOGY %
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D
ANNUAL REPORT 2016
15. REMUNERATION REPORT – AUDITED (continued)
15.3 Analysis of bonuses included in remuneration - audited
Details of the vesting profile of the short-term incentive cash bonuses included as remuneration to each director of the Company,
and other key management personnel for 2015 and 2016 are detailed below:
Director
Mr DE Gladstone
Executives
Mr ML Ludski
Mr V Bruzzese
Mr I Cooper
Mr PS Clarebrough(D)
Short term incentive bonus
Included in remuneration
$ (A)
30 Jun 2016
30 Jun 2015
% Vested in year
(B)
30 Jun 2016
30 Jun 2015
% Forfeited in year
(C)
30 Jun 2016
30 Jun 2015
47,511
24,298
9,489
8 ,4 42
9,498
–
–
–
–
–
83%
83%
83%
83%
83%
–
–
–
–
–
–
–
–
–
–
100%
100%
100%
100%
100%
A.
B.
C.
D.
Amounts included in remuneration for the 2015 financial year represent the amount accrued in the current year for a portion of the 25%
short term incentive bonus achieved in FY15. No short term incentive was awarded in the current period.
The amount vested in the 2015 year represented 83% of the 25% STI amount awarded and deferred, subject to service conditions.
The amounts forfeited are due to the performance criteria not being met in relation to the current financial year.
The STI amount included is for the period Mr PS Clarebrough was a key management person.
15.4 Equity instruments – audited
All rights and options refer to rights and options over ordinary shares of Ainsworth Game Technology Limited, unless otherwise
stated, which are exercisable on a one-for-one basis under the ESOT and RST plans.
15.4.1 Rights over equity instruments granted as compensation – audited
No rights over ordinary shares in the Company were granted as compensation to any key management person during the
reporting period.
15.4.2 Modification of terms of equity-settled share-based payment transactions – audited
No terms of equity-settled share-based payment transactions (including performance rights granted as compensation to a key
management person) have been altered or modified by the issuing entity during the reporting period or the prior period.
15.4.3 Exercise of options granted as compensation – audited
During the reporting period 227,345 shares (2015: 145,700 shares) were issued under the ESOT plan on the exercise of options
previously granted as compensation. Options under the ASOT plan exercised during 2016 were 300,764 (2015: 285,935) which
were transferred to the ASOT on behalf of employees from the Company’s Executive Chairman, Mr LH Ainsworth.
32
Directors’ Report (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY 15.4.4 Details of equity incentives affecting current and future remuneration – audited
Details of vesting profiles of rights held by each key management person of the Group are detailed below:
Mr DE Gladstone
Mr ML Ludski
Mr V Bruzzese
Mr I Cooper
Mr PS Clarebrough(1)
Instrument
Number
Grant date
% vested
in year
% forfeited
in year (A)
Financial
years in which
grant vests
Rights
Rights
Rights
Rights
Rights
Rights
Rights
Rights
Rights
Rights
137,536
22 July 2013
263,056 17 March 2015
61,084
22 July 2013
95,773 17 March 2015
44,911
22 July 2013
52,490 17 March 2015
39,490
22 July 2013
46,953 17 March 2015
77,178
22 July 2013
115,715 17 March 2015
– %
– %
– %
– %
– %
– %
– %
– %
– %
– %
– %
– %
– %
– %
– %
– %
– %
– %
– %
– %
2017-2018
2018-2019
2017-2018
2018-2019
2017-2018
2018-2019
2017-2018
2018-2019
2017-2018
2018-2019
(1)
A.
Mr PS Clarebrough resigned on 22 December 2015 and ceased to be a key management person as at this date.
The % forfeited in the year represents the reduction from the maximum number of rights available to vest.
15.4.5 Analysis of movements in equity instruments – audited
The movement during the reporting period, by value, of rights over ordinary shares in the Company held by each key
management person of the Group is detailed below.
Granted in year
$
Amount paid
on exercise
$
Value of rights
exercised
in year
$(A)
Forfeited
in year
$
Mr DE Gladstone
Mr ML Ludski
Mr V Bruzzese
Mr I Cooper
Mr PS Clarebrough(1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1)
A.
Mr PS Clarebrough resigned on 22 December 2015 and ceased to be a key management person as at this date.
No rights were exercised during the year.
–
–
–
–
–
33
Directors’ Report (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 15. REMUNERATION REPORT – AUDITED (continued)
15.4.6 Rights over equity instruments – audited
The movement during the reporting period, by number of rights over ordinary shares in Ainsworth Game Technology Limited
held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Held at
1 July 2015
Granted as
compensation
Exercised
Held at
30 June 2016
Vested during
the year
Vested and
exercisable at
30 June 2016
Rights
Mr DE Gladstone
Mr ML Ludski
Mr V Bruzzese
Mr I Cooper
Mr PS Clarebrough(1)
400,592
156,857
97,401
86,443
192,893
–
–
–
–
–
–
–
–
–
–
400,592
156,857
97,401
86,443
192,893
–
–
–
–
–
–
–
–
–
–
(1) Mr PS Clarebrough resigned on 22 December 2015 and ceased to be a key management person as at this date.
Rights held by key management personnel that are vested and exercisable at 30 June 2016 were Nil (2015: Nil). No rights or
options were held by related parties of key management personnel.
Movements in shares
The movement during the reporting period in the number of ordinary shares in Ainsworth Game Technology Limited held,
directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Held at
1 July 2015
Received on
exercise of
options/rights
Sales on
exercise of
options under
ASOT plan
DRP
allotment
Other
changes(3)
Held at
30 June 2016
Mr LH Ainsworth
203,248,149
Mr GJ Campbell
Mr MB Yates
Mr CJ Henson
Mr DE Gladstone
MS HA Scheibenstock(1)
Mr M Ludski
Mr V Bruzzese
Mr I Cooper
Mr PS Clarebrough(2)
300,000
22,400
100,000
28,000
–
10,000
10,500
6,000
15,385
–
–
–
–
–
–
–
–
–
–
(300,764)
4,559,288
1,617,451
209,124,124
–
–
–
–
–
–
–
–
–
–
–
2,838
1,136
–
–
239
137
–
–
300,000
4,200
25,000
22,000
–
–
–
–
–
26,600
127,838
51,136
–
10,000
10,739
6,137
15,385
(1) Ms HA Scheibenstock was appointed a director on 18 January 2016.
(2) Mr PS Clarebrough resigned on 22 December 2015 and ceased to be a key management person as at this date.
(3) Other changes represent shares that were purchased or sold during the year.
No shares were granted to key management personnel during the reporting period as compensation in 2016 or 2015.
34
Directors’ Report (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY There were no changes in key management in the period after the reporting date and prior to the date when the Financial
Report was authorised for issue.
This Directors’ report is made out in accordance with a resolution of the directors:
LH Ainsworth
Executive Chairman
Dated at Sydney this 23rd day of August 2016
35
Directors’ Report (continued)for the year ended 30 June 2016ANNUAL REPORT 2016
In thousands of AUD
Assets
Cash and cash equivalents
Receivables and other assets
Inventories
Prepayments
Investments
Total current assets
Receivables and other assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Equity-accounted investee
Total non-current assets
Total assets
Liabilities
Trade and other payables
Loans and borrowings
Employee benefits
Current tax liability
Provisions
Total current liabilities
Loans and borrowings
Employee benefits
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
Note
2016
2015
18
17
16
17
15
12
13
14
24
21
22
25
21
22
15
26,433
118,800
55,717
7,112
–
41,300
110,722
58,424
6,177
4,557
208,062
221,180
37,903
1,569
109,493
74,124
4,831
36,312
2,771
55,279
33,090
–
227,920
127,452
435,982
348,632
30,298
118
6,950
9,527
813
29,391
175
9,202
12,960
754
47,706
52,482
67,777
679
3,933
72,389
120,095
9,250
905
5,508
15,663
68,145
315,887
280,487
193,754
133,610
182,360
116,385
(11,477)
(18,258)
315,887
280,487
The notes on pages 40 to 80 are an integral part of these consolidated financial statements.
36
Consolidated Statement of Financial Positionas at 30 June 2016AINSWORTH GAME TECHNOLOGY In thousands of AUD
Revenue
Cost of sales
Gross profit
Other income
Sales, service and marketing expenses
Research and development expenses
Administrative expenses
Other expenses
Results from operating activities
Finance income
Finance costs
Net finance income
Share of profit of equity accounted investee
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Items that may be reclassified to profit and loss:
Foreign operations – foreign currency translation differences
Total other comprehensive income
Total comprehensive income for the year
Profit attributable to owners of the Company
Total comprehensive income attributable to the owners of the Company
Earnings per share:
Basic earnings per share (AUD)
Diluted earnings per share (AUD)
Note
7
8
11
11
15
2016
2015
285,477
240,643
(113,779)
171,698
887
(52,028)
(28,580)
(19,781)
(4,413)
67,783
7,679
(689)
6,990
365
75,138
(19,435)
55,703
951
951
56,654
55,703
56,654
(88,640)
152,003
445
(38,943)
(25,431)
(18,606)
(3,815)
65,653
28,712
(46)
28,666
–
94,319
(23,966)
70,353
5,428
5,428
75,781
70,353
75,781
20
20
$0.17
$0.17
$0.22
$0.22
The notes on pages 40 to 80 are an integral part of these consolidated financial statements.
37
Consolidated Statement of Comprehensive Incomefor the year ended 30 June 2016ANNUAL REPORT 2016 In thousands of AUD
Balance at 1 July 2014
Total comprehensive income for the period
Profit
Transfer between reserves
Other comprehensive income
Foreign currency translation reserve
Total other comprehensive income
Total comprehensive income for the period
Transactions with owners, recorded
directly in equity
Issue of ordinary shares on exercise of share
options
Dividends to owners of the Company
Share-based payment transactions
Share based payment adjustment on
non-vesting options
Total transactions with owners
Balance at 30 June 2015
Attributable to owners of the Company
Issued
capital
Equity
compensation
reserve
Fair
value
reserve
Translation
reserve
Profits
reserve
Accumulated
losses
Total
equity
182,327
2,426
9,684
401 61,980
(21,516) 235,302
–
–
–
–
–
33
–
–
–
33
–
–
–
–
–
–
–
1,598
(64)
1,534
–
–
–
–
–
–
–
–
–
–
–
–
70,353
70,353
– 67,159
(67,159)
–
5,428
5,428
–
–
–
–
5,428
5,428
5,428
67,159
3,194
75,781
–
–
– (32,227)
–
–
–
–
– (32,227)
–
–
–
64
64
33
(32,227)
1,598
–
(30,596)
182,360
3,960 9,684
5,829 96,912
(18,258) 280,487
Balance at 1 July 2015
182,360
3,960 9,684
5,829 96,912
(18,258) 280,487
Total comprehensive income for the period
Profit
Transfer between reserves
Other comprehensive income
Foreign currency translation reserve
Total other comprehensive income
Total comprehensive income for the period
Transactions with owners, recorded
directly in equity
Issue of ordinary shares on exercise of share
options
Issue of ordinary shares under the Dividend
Reinvestment Plan
Dividends to owners of the Company
Share-based payment transactions
Share based payment adjustment on non-
vesting options
Total transactions with owners
Balance at 30 June 2016
–
–
–
–
–
52
11,342
–
–
–
11,394
193,754
–
–
–
–
–
–
–
–
(403)
(141)
(544)
–
–
–
–
–
–
–
–
–
–
–
–
–
55,703
55,703
– 49,063
(49,063)
–
951
951
–
–
–
–
951
951
951 49,063
6,640
56,654
–
–
–
–
– (32,245)
–
–
–
–
– (32,245)
–
–
–
–
52
11,342
(32,245)
(403)
141
141
–
(21,254)
3,416
9,684
6,780 113,730
(11,477) 315,887
The notes on pages 40 to 80 are an integral part of these consolidated financial statements.
38
Consolidated Statement of Changes in Equityfor the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY In thousands of AUD
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Income taxes paid
Borrowing costs paid
Net cash from operating activities
Cash flows used in investing activities
Proceeds from sale of equipment
Interest received
Acquisitions of property, plant and equipment
Payment for business acquisition
Acquisition of equity-accounted investee
Acquisition of investment
Development expenditure
Acquisition of other intangibles
Net cash used in investing activities
Cash flows generated from/(used in) financing activities
Proceeds from issue ordinary shares options
Proceeds from borrowings
Repayment of borrowings
Dividend paid
Payment of finance lease liabilities
Net cash generated from/(used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 30 June
Note
2016
2015
300,713
234,551
(223,888)
(196,996)
76,825
(23,283)
(689)
37,555
(17,305)
(47)
18(a)
52,853
20,203
34
13
56
2,974
(49,123)
(54,224)
(2,045)
–
(6,204)
–
–
3,358
(15,301)
–
–
(1,606)
(9,430)
(5,551)
(108,566)
(28,530)
52
68,824
(7,617)
33
9,142
–
(20,903)
(32,227)
(115)
40,241
(15,472)
41,300
605
26,433
(294)
(23,346)
(31,673)
71,929
1,044
41,300
The notes on pages 40 to 80 are an integral part of these consolidated financial statements.
39
Consolidated Statement of Cash Flowsfor the year ended 30 June 2016ANNUAL REPORT 2016
41
41
41
41
42
42
43
44
44
44
44
45
46
46
46
46
46
47
47
47
47
48
49
50
53
53
9. Expenses by nature
10. Employee benefit expenses
11. Finance income and finance costs
12. Property, plant and equipment
13. Intangible assets
14. Equity-accounted investee
15. Taxes
16. Inventories
17. Receivables and other assets
18. Cash and cash equivalents
53
54
54
55
56
58
59
60
61
62
18a. Reconciliation of cash flows from operating activities 62
19. Capital and reserves
20. Earnings per share
21. Loans and borrowings
22. Employee benefits
23. Share-based payments
24. Trade and other payables
25. Provisions
26. Financial instruments
27. Operating leases
28. Capital and other commitments
29. Related parties
30. Group entities
31. Subsequent events
32. Auditor’s remuneration
33. Parent entity disclosures
34. Business combinations
63
64
65
66
66
70
70
70
75
76
76
78
78
79
79
80
1. Reporting entity
2. Basis of preparation
3. Significant accounting policies
a. Basis of consolidation
b. Foreign currency
c. Financial instruments
d. Property, plant and equipment
e. Intangible assets
f. Leased assets
g. Inventories
h. Impairment
i. Employee benefits
j. Provisions
k. Warranties
l. Revenue
m. Lease payments
n. Finance income and finance costs
o. Income tax
p. Earnings per share
q. Segment reporting
r.
New standards and interpretations
not yet adopted
4. Determination of fair values
5. Financial risk management
6. Operating segments
7. Revenue
8. Other income
40
Index to Notes to the Financial Statements and Significant Accounting Policiesfor the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Notes to the
Financial Statements
(the
1. REPORTING ENTITY
Ainsworth Game Technology Limited
‘Company’)
is a company domiciled in Australia. The address of the
Company’s registered office is 10 Holker Street, Newington,
NSW, 2127. The consolidated financial statements of the
Company as at and for the year ended 30 June 2016
comprise the Company and its subsidiaries (together
referred to as the ‘Group’ and individually as ‘Group
entities’). The Group is a for-profit entity and primarily is
involved in the design, development, manufacture, sale and
servicing of gaming machines and other related equipment
and services.
2. BASIS OF PREPARATION
a. Statement of compliance
The consolidated financial statements are general
purpose financial statements which have been prepared in
accordance with Australian Accounting Standards (AASBs)
adopted by the Australian Accounting Standards Board
(AASB) and the Corporations Act 2001. The consolidated
financial statements comply with International Financial
Reporting Standards (IFRSs) adopted by the International
Accounting Standards Board (IASB).
The consolidated financial statements were authorised for
issue by the Board of Directors on 23 August 2016.
b. Basis of measurement
The consolidated financial statements have been
prepared on the historical cost basis except for loans
and borrowings with a Director related entity, which were
measured initially at fair value and then subsequently
carried at amortised cost.
c. Functional and presentation currency
The financial information of each of the Group’s entities
and foreign branches is measured using the currency of
the primary economic environment in which it operates (the
functional currency). As of 1 January 2014, The Company’s
US branch activities became a foreign operation.
These consolidated financial statements are presented
in Australian dollars, which is the Company’s primary
functional currency.
The Company is of a kind referred to in ASIC Corporations
Instrument
in Financial/Directors Reports)
(Rounding
2016/191 dated 1 April 2016 and in accordance with that
Instrument, all financial information presented in Australian
dollars has been rounded to the nearest thousand unless
otherwise stated.
is required
d. Use of estimates and judgements
The preparation of the consolidated financial statements
in conformity with IFRSs requires management to make
judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts
of assets, liabilities, income and expenses. Actual results
may differ to these estimates.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
and in any future periods affected.
The Group is subject to income taxes in Australia and
jurisdictions where it has foreign operations. Significant
in determining the worldwide
judgement
provision for income taxes. There are certain transactions
and calculations undertaken during the ordinary course of
business for which the ultimate determination is uncertain.
The Group estimates its tax liabilities based on the Group’s
understanding of the tax law. Where the final outcome
of these matters is different from the amounts that were
initially recorded, such differences will impact the current
and deferred income tax assets and liabilities in the period
in which such determination is made.
Information about assumptions and estimation uncertainties
that have a significant risk of resulting in a material adjustment
to the carrying amounts of assets and liabilities within
the next financial year are included in Note 13 - Intangible
assets and Note 26 – Financial instruments (trade and other
receivables).
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements, and have been applied consistently by
Group entities.
a. Basis of consolidation
i. Business combination
The Group accounts for business combinations using the
acquisition method when control is transferred to the Group
(see (a)(ii)). The consideration transferred in the acquisition
is generally measured at fair value as are the identifiable
net assets acquired. Any goodwill that arises is tested
annually for impairment (refer Note 3(h)). Any gain on a
bargain purchase is recognised in profit or loss immediately.
Transaction costs are expensed as incurred, except if
related to the issue of debt of equity securities.
The consideration transferred does not include amounts
related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.
41
for the year ended 30 June 2016ANNUAL REPORT 2016 3.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
ii. Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has right to,
variable returns from its involvement with the entity and has
the ability affect those returns through its power over the
entity. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that
control commences until the date that control ceases.
Interest in equity-accounted investee
iii.
A joint venture is an arrangement in which the Group
has joint control, and whereby the Group has rights to
the net assets of the arrangement, rather than rights to
its assets and obligations for its liabilities. Interest in a
joint venture accounted for using the equity method. It is
recognised initially at cost, which includes transactions
costs. Subsequently to initial recognition, the consolidated
financial statements include the Group’s share of the profit
or loss and Other Comprehensive Income (“OCI”) of the
equity-investee, until the date on which significant influence
of joint control ceases.
iv. Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised
income and expenses arising from intra-group transactions,
are eliminated in preparing the consolidated financial
statements in accordance with AASBs.
v. Acquisitions prior to 1 July 2004
As part of its transition to AASBs, the Group elected to
restate only those business combinations that occurred on
or after 1 July 2004. In respect of acquisitions prior to 1 July
2004, goodwill represents the amount recognised under
the Group’s previous accounting framework, Australian
GAAP.
vi. Acquisitions on or after 1 July 2004
For acquisitions on or after 1 July 2004, goodwill represents
the excess of the cost of the acquisition over the Group’s
interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities of the acquiree. When
the excess is negative (negative goodwill), it is recognised
immediately in profit or loss.
b. Foreign currency
i. Foreign currency transactions
Transactions in foreign currencies are translated to the
respective
functional currencies of Group entities at
exchange rates at the dates of the transaction. Monetary
assets and liabilities denominated in foreign currencies at
the balance date are retranslated to the functional currency
at the foreign exchange rate at that date. The foreign
currency gain or loss on monetary items is the difference
between amortised cost in the functional currency at the
beginning of the period, adjusted for effective interest and
payments during the period, and the amortised cost in
foreign currency translated at the exchange rate at the end
of the year.
42
ii. Foreign operations
The assets and liabilities of foreign operations are translated
to Australian dollars at exchange rates at the reporting
date. The income and expenses of foreign operations are
translated to Australian dollars at the average exchange
rates for the period.
Foreign currency differences are recognised in other
comprehensive income and presented in the Translation
Reserve in equity. When a foreign operation is disposed
of such that control is lost, the cumulative amount in the
Translation Reserve related to that foreign operation is
transferred to the profit or loss, as part of gain or loss on
disposal.
When the Group disposes of only a part of its interest in a
subsidiary that includes a foreign operation while retaining
control, the relevant portion of cumulative amounts is re-
attributed to non-controlling interest.
When the settlement of a monetary item receivable from
or payable to a foreign operation is neither planned nor
likely in the foreseeable future, foreign exchange gains and
losses arising from such a monetary item are considered
to form part of a net investment in a foreign operation,
are recognised in other comprehensive income and are
presented in the translation reserve in equity.
c. Financial instruments
i. Non-derivative financial assets
Non-derivative financial assets comprise trade and other
receivables and cash and cash equivalents.
Trade and other receivables are recognised on the date
that they are originated. Financial assets are derecognised
if the Group’s contractual rights to the cash flows from
the financial assets expire or if the Group transfers the
financial asset to another party without retaining control
or substantially all risks and rewards of ownership of the
financial asset are transferred.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and
only when, the Group has a legal right to offset the amounts
and intends either to settle on a net basis or to realise the
asset and settle the liability simultaneously.
Trade and other receivables are financial assets with fixed
or determinable payments that are not quoted in an active
market. Such assets are recognised initially at fair value.
Subsequent to initial recognition trade and other receivables
are measured at amortised cost using the effective interest
method, less any impairment losses.
The assessment amount of current and non-current
receivable involves reviewing contractual term and how it
compares to the current payment trend. When the current
payment trend is less favourable from the contractual term,
the Group will base the current and non-current on payment
trend.
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Cash and cash equivalents comprise cash balances and
call deposits with original maturities of three months or less
from the acquisition date that are subject to an insignificant
risk of changes in their fair value, and are used by the Group
in the management of its short-term commitments.
loans and
liabilities comprise
ii. Non-derivative financial liabilities
Non-derivative financial
borrowings and trade and other payables.
Debt securities issued and subordinated liabilities are
initially recognised on the date that they are originated. All
other financial liabilities are recognised initially on the trade
date at which the Group becomes a party to the contractual
provisions of the instrument. The Group derecognises
a financial liability when its contractual obligations are
discharged or cancelled or expire.
Loans and borrowings and trade and other payables are
recognised initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, these
financial liabilities are measured at amortised cost with
any difference between cost and redemption value being
recognised in the income statement over the period of the
borrowings on an effective interest basis.
terms and conditions of borrowings are
Where
modified, the carrying amount is remeasured to fair value.
Any difference between the carrying amount and fair value
is recognised in equity.
the
iii. Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to issue of ordinary shares and share
options are recognised as a deduction from equity, net of
any tax effects.
d. Property, plant and equipment
i. Recognition and measurement
Items of property, plant and equipment are measured at
cost less accumulated depreciation and impairment losses.
Cost includes expenditures that are directly attributable
to the acquisition of the asset. Purchased software that
is integral to the functionality of the related equipment is
capitalised as part of that equipment.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Machines previously held as inventory are transferred to
property, plant and equipment when a rental or participation
agreement is entered into. When the rental or participation
agreements cease and the machines become held for sale,
they are transferred to inventory at their carrying amount.
Proceeds are reflected in revenue while value disposed
are recognised as cost of sale. These are treated as an
operating cash flow.
Gains and losses on disposal of an item of property, plant
and equipment are determined by comparing the proceeds
from disposal with the carrying amount of the property,
plant and equipment and are recognised net within “other
income” in profit and loss.
ii. Subsequent costs
The cost of replacing a part of an item of property, plant and
equipment is recognised in the carrying amount of an item
if it is probable that the future economic benefits embodied
within the part will flow to the Group and its cost can be
measured reliably. The costs of the day-to-day servicing of
property, plant and equipment are recognised in profit or
loss as incurred.
iii. Depreciation
Depreciation is based on the cost of an asset less its
residual value. Significant components of individual assets
are assessed and if a component has a useful life that is
different from the remainder of that asset, that component is
depreciated separately.
Depreciation is recognised in profit or loss on a straight-line
basis over the estimated useful lives of each part of an item
of property, plant and equipment since this most closely
reflects the expected pattern of consumption of the future
economic benefits embodied in the assets. Leased assets
are depreciated over the shorter of the lease term and their
useful lives unless it is reasonably certain that the Group will
obtain ownership by the end of the lease term. Land is not
depreciated.
Items of property, plant and equipment are depreciated
from the date that they are installed and are ready for use,
or in respect of internally constructed assets, from the date
that the asset is completed and ready for use.
The estimated useful lives for the current and comparative
periods are as follows:
– buildings
– leasehold improvements
– plant and equipment
39 – 40 years
10 years
2.5 – 20 years
The useful lives of capitalised machines leased under rental
or participation agreements are included in the plant and
equipment useful lives.
Depreciation methods, useful lives and residual values
are reviewed at each financial year-end and adjusted if
appropriate.
43
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 3.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
Intangible assets
e.
i. Goodwill
Goodwill that arises upon the acquisition of subsidiaries
is included in intangible assets. For the measurement
of goodwill at initial recognition, see Note 3(a)(v) and (vi).
Goodwill is subsequently carried at cost less accumulated
impairment losses (refer Note 3(h)).
ii. Research and development
Expenditure on
research activities, undertaken with
the prospect of gaining new technical knowledge and
understanding, is recognised in profit or loss when incurred.
Development activities involve a plan or design for the
production of new or substantially improved products and
processes. Development expenditure is capitalised only if
development costs can be measured reliably, the product
or process is technically and commercially feasible, future
economic benefits are probable, and the Group intends
to and has sufficient resources to complete development
and to use or sell the asset. The expenditure capitalised
includes the cost of materials, direct labour and overhead
costs that are directly attributable to preparing the asset
for its intended use. Other development expenditure and
discontinued projects that are expected to have no further
economic benefit are recognised in profit or loss when
incurred.
Capitalised development expenditure is measured at cost
less accumulated amortisation and accumulated impairment
losses.
iii. Other intangible assets
Other intangible assets, which include intellectual property,
technology and software assets, customer relationships,
tradenames and trademarks, and service contracts, that
are acquired by the Group through business combinations,
which have finite useful lives, are measured at cost less
accumulated amortisation and accumulated impairment
losses. Refer Note 3(a)(i) for details on the determination of
cost of these acquired assets.
iv. Subsequent expenditure
Subsequent expenditure
it
increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure,
including expenditure on internally generated goodwill and
brands, is recognised in profit or loss when incurred.
is capitalised only when
v. Amortisation
Amortisation is based on the cost of an asset less its
residual value. Amortisation is recognised in profit or loss
on a straight-line basis over the estimated useful lives of
intangible assets, other than goodwill, from the date that
they are available for use, since this most closely reflects
the expected pattern of consumption of the future economic
benefit embodied in the asset.
44
The estimated useful lives for the current and comparative
periods are as follows:
– capitalised development costs
– intellectual property
– technology and software
– customer relationships and contracts
acquired
– tradenames and trademarks
– service contracts
4-5 years
3-10 years
5-10 years
3-10 years
3 years
3 years
Amortisation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
During the year, management re-evaluated the useful
lives of capitalised development costs to better reflect the
expected pattern of consumption of the future economic
benefit embodied in this class of asset, for costs capitalised
from 1 July 2015. As a result, development costs that are
capitalised from 1 July 2015 onwards are amortised over
5 years.
f. Leased assets
Leases in terms of which the Group assumes substantially
all the risks and rewards of ownership are classified as
finance leases. Upon initial recognition the leased asset is
measured at an amount equal to the lower of its fair value
and the present value of the minimum lease payments.
Subsequent to initial recognition, the asset is accounted for
in accordance with the accounting policy applicable to that
asset.
Other leases are operating leases and the leased assets
are not recognised on the Group’s statement of financial
position.
Inventories
g.
Inventories are measured at the lower of cost and net
realisable value. The cost of inventories is based on the
first-in first-out principle, and includes expenditure incurred
in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their
existing location and condition. In the case of manufactured
inventories and work
includes an
appropriate share of production overheads based on normal
operating capacity. Net realisable value is the estimated
selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses.
in progress, cost
Impairment
h.
i. Non-derivative financial assets
A financial asset not carried at fair value through profit
or loss is assessed at each reporting date to determine
whether there is any objective evidence that it is impaired.
A financial asset is considered to be impaired if objective
evidence indicates that one or more events have had a
negative effect on the estimated future cash flows of that
asset that can be estimated reliably.
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Objective evidence that financial assets are impaired can
include default or delinquency by a debtor, restructuring of
an amount due to the Group on terms that the Group would
not otherwise consider and indications that a debtor will
enter bankruptcy.
Financial assets measured at amortised cost
The Group considers evidence of impairment for financial
assets measured at amortised cost (loans and receivables)
at both a specific and collective level. All individually
significant financial assets are tested for impairment on
an individual basis. The remaining financial assets are
assessed collectively in groups that share similar credit risk
characteristics.
In assessing collective impairment the Group uses historical
trends of the probability of default, timing of recoveries and
the amount of loss incurred, adjusted for management’s
judgement as to whether current economic, industry and
credit conditions are such that the actual losses are likely to
be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured
at amortised cost is calculated as the difference between its
carrying amount, the present value of the estimated future
cash flows discounted at the original effective interest rate.
All impairment losses are recognised in profit or loss and
reflected in an allowance account against receivables. An
impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss
was recognised. When a subsequent event causes the
amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit and loss.
ii. Non-financial assets
The carrying amounts of the Group’s non-financial assets,
other than inventories and deferred tax assets, are reviewed
at each reporting date to determine whether there is any
indication of impairment. If any such indication exists then
the asset’s recoverable amount is estimated. For goodwill
and intangible assets that have indefinite lives or that are
not yet available for use, recoverable amount is estimated at
each reporting date. An impairment loss is recognised if the
carrying amount of an asset or its related cash generating
unit (CGU) exceeds its estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater
of its value in use and its fair value less costs to sell. In
assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time
value of money and the risks specific to the asset, CGU or
group of CGUs. For the purpose of impairment testing, assets
are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of
assets (the “CGU or group of CGUs”). The goodwill acquired
in a business combination for the purpose of impairment
testing, is allocated to CGUs or group of CGUs that are
expected to benefit from the synergies of the combination.
The Group’s corporate assets do not generate separate
cash inflows and are utilised by more than one CGU.
Corporate assets are allocated to CGUs or group of CGUs
on a reasonable and consistent basis and tested for
impairment as part of the testing of the CGU or group of
CGUs to which the corporate asset is allocated.
An impairment loss is recognised if the carrying amount
of an asset or its CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. Impairment
losses recognised in respect of CGUs are allocated first to
reduce the carrying amount of any goodwill allocated to the
CGUs and then to reduce the carrying amount of the other
assets in the CGU or group of CGUs on a pro rata basis.
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, impairment losses recognised
in prior periods are assessed at each reporting date for
any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had
been recognised.
i. Employee benefits
i. Defined contribution superannuation funds
A defined contribution plan is a post-employment benefit
plan under which an entity pays fixed contributions into
a separate entity and will have no legal or constructive
obligation to pay further amounts.
Obligations
to defined contribution
superannuation funds are recognised as an employee
benefit expense in profit or loss in the periods during which
services are rendered by employees.
for contributions
ii. Other long term employee benefits
The Group’s net obligation in respect of long-term employee
benefits is the amount of future benefit that employees have
earned in return for their service in the current and prior
periods plus related on-costs; that benefit is discounted to
determine its present value, and the fair value of any related
assets is deducted. The discount rate is the yield rate at
the reporting date on government bonds that have maturity
dates approximating the terms of the Group’s obligations.
iii. Termination benefits
Termination benefits are recognised as an expense when
the Group is demonstrably committed, without realistic
possibility of withdrawal, to a formal detailed plan to
terminate employment before the normal retirement date or
to provide termination benefits as a result of an offer made
to encourage voluntary redundancy. Termination benefits
for voluntary redundancies are recognised if the Group
has made an offer encouraging voluntary redundancy, it is
probable that the offer will be accepted, and the number of
acceptances can be estimated reliably.
45
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 3.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
iv. Short term benefits
Liabilities for employee benefits for wages, salaries and
leave represent present obligations resulting
annual
from employees’ services provided to reporting date
and are calculated at undiscounted amounts based on
remuneration wage and salary rates that the Group expects
to pay as at reporting date including related on-costs, such
as workers remuneration insurance and payroll tax. Non-
accumulating non-monetary benefits, such as cars and free
or subsidised goods and services, are expensed based on
the net marginal cost to the Group as the benefits are taken
by the employees.
A liability is recognised for the amount expected to be
paid under short-term cash bonus plans if the Group has a
present legal or constructive obligation to pay this amount
as a result of past service provided by the employee and
the obligation can be estimated reliably.
v. Share-based payment transactions
The grant date fair value of options granted to employees is
recognised as an employee expense, with a corresponding
increase in equity, over the period in which the employees
become unconditionally entitled to the options. The amount
recognised as an expense is adjusted to reflect the actual
number of share options for which the related service and
non-market vesting conditions are expected to be met,
such that the amount ultimately recognised is based on the
number of awards that meet the related service and non-
market performance conditions at the vesting date. Where
such adjustments result in a reversal of previous expenses
these are recognised as a credit to profit or loss in the
period that it is assessed that certain vesting conditions will
not be met.
j. Provisions
A provision is recognised if, as a result of a past event,
the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an
outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
The unwinding of the discount is recognised as a finance
cost.
k. Warranties
A provision for warranties is recognised when the underlying
products are sold. The provision is based on historical
warranty data and a weighting of all possible outcomes
against their associated probabilities.
46
l. Revenue
i. Goods sold
Revenue from the sale of goods in the course of ordinary
activities is measured at the fair value of the consideration
received or receivable, net of returns, allowances and
trade discounts. Revenue is recognised when persuasive
evidence exists usually in the form of an executed sales
agreement, that the significant risks and rewards of
ownership have been transferred to the buyer, recovery
of the consideration is probable, the associated costs and
possible return of goods can be estimated reliably, there is
no continuing management involvement with the goods, and
the amount of revenue can be measured reliably. Transfer
of risks and rewards vary depending on the individual terms
of the contract of sale.
When gaming machines, games, conversions and other
incidental items are licensed to customers for extended
periods, revenue is recognised on delivery for gaming
including
machines and games and
conversions on a straight line basis over the licence term.
The revenue recognised for each item is based on the
relative fair values of the items included in the arrangement.
for other
items
ii. Services
Revenue from services rendered is recognised in profit or
loss when the services are performed.
iii. Participation and rental
Participation revenue is revenue earned when the Group’s
owned machines are placed in venues either directly by
the Group or indirectly through a licensed operator for a
fee. The fee is calculated as either a daily fee or an agreed
fee based upon a percentage of turnover of participating
machines, depending on the agreement.
Revenue from rental of gaming machines is recognised in
profit or loss on a straight line basis over the term of the
rental agreement.
m. Lease payments
Payments made under operating leases are recognised in
profit or loss on a straight-line basis over the term of the
lease. Lease incentives received are recognised as an
integral part of the total lease expense, over the term of
the lease.
Minimum lease payments made under finance leases
are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense
is allocated to each period during the lease term so as to
produce a constant periodic rate of interest on the remaining
balance of the liability.
n. Finance income and finance costs
Finance income comprises interest income and foreign
currency gains. Interest income is recognised in profit or
loss as it accrues using the effective interest method.
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Finance costs comprise interest expense on borrowings,
foreign currency losses and impairment losses recognised
on financial assets. Borrowing costs that are not directly
attributable to the acquisition, construction or production of
a qualifying asset are recognised in profit or loss using the
effective interest method.
Foreign currency gains and losses are reported on a net
basis as either finance income or finance cost depending
on whether foreign currency movements are in a net gain
or net loss position.
Income tax
is recognised
o.
Income tax expense comprises current and deferred tax.
Current and deferred tax are recognised in profit or loss
except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in other
comprehensive income.
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax
payable in respect of previous years.
Deferred tax
in respect of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is not recognised
for temporary differences arising from: the initial recognition
of assets or liabilities that affect neither accounting nor
taxable profit, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse
in the foreseeable future.
Deferred tax is not recognised for taxable temporary
differences arising from the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected
to be applied to the temporary differences when they
reverse, based on the laws that have been enacted or
substantively enacted by the reporting date.
In determining the amount of current and deferred tax
the Group takes into account the impact of uncertain tax
positions and whether additional taxes and interest may be
due. The Group believes that its accruals for tax liabilities
are adequate for all open tax years based on its assessment
of many factors, including interpretations of tax law and
prior experience. This assessment relies on estimates and
assumptions and may involve a series of judgements about
future events. New information may become available that
causes the Group to change its judgement regarding the
adequacy of existing tax liabilities; such changes to tax
liabilities will impact tax expense in the period that such a
determination is made.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same
tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and
assets on a net basis or their tax assets and liabilities will be
realised simultaneously.
A deferred tax asset is recognised for unused tax losses,
tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be
available against which they can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax
benefit will be realised, see Note 15.
p. Earnings per share
The Group presents basic and diluted earnings per share
(EPS) data for its ordinary shares. Basic EPS is calculated
by dividing the profit or loss attributable to ordinary
shareholders of the Company by weighted average number
of ordinary shares outstanding during the period. Diluted
EPS is determined by adjusting the profit or loss attributable
to ordinary shareholders and the weighted average number
of ordinary shareholders and the weighted average number
of ordinary shares outstanding for the effects of all dilutive
potential ordinary shares, which comprise convertible notes
and share options granted to employees.
q. Segment reporting
An operating segment is a component of the Group that
engages in business activities from which it may earn
revenues and incur expenses, including revenues and
expenses that relate to transactions with any of the Group’s
other components. All operating segments’ operating
results are regularly reviewed by the Group’s CEO to make
decisions about resources to be allocated to the segment
and assess its performance, and for which discrete financial
information is available.
Segment results that are reported to the CEO include items
directly attributable to a segment as well as those that can
be allocated on a reasonable basis.
r.
New standards and interpretations
not yet adopted
Certain new accounting standards and interpretations have
been published that are not mandatory for 30 June 2016
reporting periods. Those which may have a significant
impact to the Group are set out below. The Group does not
plan to adopt these standards early.
AASB 9 Financial Instruments (2014)
AASB 9 (2014), published in December 2014, replaces the
existing guidance AASB 9 (2009), AASB 9 (2010) and AASB 139
Financial Instruments: Recognition and Measurement and is
effective for annual reporting periods beginning on or after
1 January 2018, with early adoption permitted.
47
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 3.
SIGNIFICANT ACCOUNTING POLICIES
(continued)
ii.
The key changes introduced in AASB 9 (2014) are:
i.
requirements for impairment of financial assets based on
a three-stage ‘expected loss’ approach;
limited amendments to classification and measurement
of financial assets to add a third measurement category
for debt instruments. The new category of fair value
through other comprehensive income is added to the
existing categories for debt instruments, i.e. amortised
cost and fair value through profit or loss; and
iii. amendments
Instruments:
to AASB 7 Financial
Disclosures that significantly expand the disclosures
required in relation to credit risk.
The Group is assessing the potential impact on its
consolidated financial statements
the
application of AASB 9 (2014).
resulting
from
including
AASB 15 Revenue from Contracts with Customers
AASB 15 establishes a comprehensive framework for
determining whether, how much and when revenue is
recognised,
in respect of multiple element
arrangements. It replaces existing revenue recognition
guidance, AASB 111 Construction Contracts, AASB 118
Revenue and AASB 1004 Contributions. AASB 15 is
effective from annual reporting periods beginning on or
after 1 January 2018, with early adoption permitted.
The Group is assessing the potential impact on its
the
consolidated financial statements
application of AASB 15.
resulting
from
AASB 16 Leases
AASB 16 removes the classification of leases as either
operating leases or finance leases – for the lessee -
effectively treating all leases as finance leases. Short-
term leases (less than 12 months) and leases of low-value
assets (such as personal computers) are exempt from the
lease accounting requirements. There are also changes in
accounting over the life of the lease. In particular, companies
will not recognise a front-loaded pattern of expenses for
most leases, even when they pay constant rentals.
Lessor accounting remains similar to current practice i.e.
lessors continue to classify leases as finance and operating
leases.
AASB 16
from annual reporting periods
beginning on or after 1 January 2019, with early adoption
permitted for entities that also adopt AASB 15.
The Group is assessing the potential impact on its
consolidated financial statements
the
application of AASB 16.
No other new standards, amendments
to standards
and interpretations are expected to affect the Group’s
consolidated financial statements.
is effective
resulting
from
48
4. DETERMINATION OF FAIR VALUES
A number of the Group’s accounting policies and disclosures
require the determination of fair value, for both financial and
non-financial assets and liabilities. Fair values have been
determined for measurement and/or disclosure purposes
based on the following methods. Where applicable, further
information about the assumptions made in determining
fair values is disclosed in the notes specific to that asset or
liability.
Intangible assets
i.
The fair value of customer contracts acquired in a business
combination is based on the discounted cash flows
expected to be derived from the use or eventual sale of
these contracts. The fair value of other intangible assets is
based on the discounted cash flows expected to be derived
from the use and eventual sale of the assets.
ii. Trade and other receivables / payables
For receivables / payables with a remaining life of less than
one year, the notional amount is deemed to reflect the fair
value. The fair value of all other receivables / payables
is estimated as the present value of future cash flows,
discounted at the market rate of interest at the reporting
date.
iii. Non-derivative financial instruments
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal
and interest cash flows, discounted at the market rate
of interest at the reporting date. In respect of the liability
component of convertible notes, the market rate of interest
is determined by reference to similar liabilities that do not
have a conversion option. For finance leases the market
rate of interest is determined by reference to similar lease
agreements.
iv. Loans and borrowings
Fair value is calculated based on discounted expected
future principal and interest cash flows.
v. Finance lease liabilities
The fair value is estimated as the present value of future
cash flows, discounted at market
for
homogeneous lease agreements. The estimated fair values
reflect changes in interest rates.
interest rates
vi. Share-based payment transactions
The fair value of employee stock options is measured using
the Black Scholes Merton model. Measurement inputs
include share price on measurement date, exercise price
of the instrument, expected volatility (based on weighted
average historic volatility adjusted for changes expected
due to publicly available information), weighted average
expected life of the instruments (based on historical
experience and general option holder behaviour), expected
(based on
dividends, and the risk-free
government bonds). Service and non-market performance
conditions attached to the transactions are not taken into
account in determining fair value.
interest rate
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY 5. FINANCIAL RISK MANAGEMENT
Overview
The Group has exposure to the following risks from their
use of financial instruments:
– Credit risk;
– Liquidity risk; and
– Market risk.
This note presents information about the Group’s exposure
to each of the above risks, its objectives, policies and
processes for measuring and managing risk, and the
management of capital. Further quantitative disclosures are
included throughout this financial report.
Risk management framework
The Board of Directors has overall responsibility for the
establishment and oversight of the risk management
framework. The Board has established processes through
the Group Audit Committee, which is responsible for
developing and monitoring risk management policies. The
Committee reports regularly to the Board of Directors on
its activities.
Risk management policies are established to identify and
analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to
limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the
Group’s activities. The Group, through its training and
management standards and procedures, aims to develop
a disciplined and constructive control environment in which
all employees understand their roles and obligations.
The Group’s Audit Committee oversees how management
monitors compliance with the Group’s risk management
policies and procedures and reviews the adequacy of the
risk management framework in relation to the risks faced by
the Group. The Audit Committee is assisted in its oversight
role by Internal Audit. Internal Audit undertakes reviews of
risk management controls and procedures, the results of
which are reported to the Audit Committee.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from
the Group’s receivables from customers.
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by
the individual characteristics of each customer, including
the default risk of the industry and country in which
customers operate. The Group’s concentration of credit risk
is disclosed in Note 26.
Credit policy guidelines have been introduced under
which each new customer is assessed by the compliance
division as to suitability and analysed for creditworthiness
before the Group’s standard payment and delivery terms
and conditions are offered. The Group’s review includes
from
investigations, external ratings, when available, and in some
cases bank references. Purchase limits are established
for each customer, which represents the maximum open
amount without
the Board.
requiring approval
Customers that fail to meet the Group’s creditworthiness
criteria may only transact with the Group within established
limits unless Board approval is received or otherwise only
on a prepayment basis.
In monitoring customer credit risk, customers are grouped
according to their credit characteristics, including whether
they are an individual or legal entity, whether they are a
distributor, operator or customer, geographic location,
aging profile, maturity and existence of previous financial
difficulties. The Group’s trade and other receivables relate
mainly to the Group’s direct customers, operators and
established distributors. Customers that are graded as
“high risk” require future sales to be made on a prepayment
basis within sales limits approved by the Chief Executive
Officer and Chief Financial Officer, and thereafter only with
Board approval.
The assessment amount of current and non-current
receivables involves reviewing contractual term and how
it compares to current payment trend. When the current
payment trend is less favourable from the contractual term,
the Group will base the current and non-current on payment
trend.
Goods are sold subject to retention of title clauses, so that
in the event of non-payment the Group may have a secured
claim. The Group does not require collateral in respect of
trade and other receivables.
The Group has established an allowance for impairment
that represents its estimate of incurred losses in respect
of trade and other receivables. The main components of
this allowance are a specific loss component that relates to
individually significant exposures.
Guarantees
The Group’s policy is to provide financial guarantees only for
wholly-owned subsidiaries. At 30 June 2016 no guarantees
were outstanding (2015: none).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group’s
approach to managing liquidity is to ensure, as far as
possible, that it will always have sufficient liquidity to meet
its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
Typically the Group ensures that it has access to sufficient
cash on demand to meet expected operational expenses
for a period of 60 days, including the servicing of financial
obligations; this excludes the potential impact of extreme
circumstances that cannot reasonably be predicted, such
as natural disasters.
49
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 to
6. OPERATING SEGMENTS
Information reported
the Group’s Chief Executive
Officer (CEO) for the purposes of resource allocation and
assessment of performance is focused on the geographical
location of customers of gaming machines. The primary
geographical location of customers and therefore the
Group’s reportable segments under AASB 8 are outlined in
the table on the following page.
The NSW and North and South America segments include
the aggregation of the Group’s other operating segments
that are not separately reportable. Included in the NSW
and North and South America segments are the results of
the operating segments related to the servicing of gaming
machines in those geographical regions. These operating
to have similar economic
segments are considered
characteristics as the nature of the products and services is
complementary and the nature of the regulatory environment
and type of customer are consistent. Performance of each
reportable segment is based on segment revenue and
segment result as included in internal management reports
that are reviewed by the Group’s CEO. Segment result
only takes into account directly attributable costs, which
management believes is the most relevant approach in
evaluating segment performance.
The Group has a large and dispersed customer base.
The Group’s largest customer accounts for only 2.27% of
the total reportable revenue.
5. FINANCIAL RISK MANAGEMENT (continued)
Market risk
Market risk is the risk that changes in market prices, such
as foreign exchange rates and interest rates will affect the
Group’s income or the value of its holdings of financial
instruments. The objective of market risk management
is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
Currency risk
The Group is exposed to currency risk on sales and
purchases that are denominated in a currency other than the
respective functional currencies of Group entities, primarily
the Australian dollar (AUD) and the US dollar (USD). The
currency in which these transactions primarily denominated
is in USD for the Australian business operations. The Group
regularly monitors and reviews, dependent on available
facilities, the hedging of net assets denominated in a foreign
currency. The Group has previously utilised currency call
options to hedge its currency risk, most with a maturity
of less than six months. No hedging arrangements were
utilised during the reporting period.
In respect of other monetary assets and
liabilities
denominated in foreign currencies, the Group monitors
its net exposure to address short-term imbalances in its
exposure.
Interest rate risk
The Group’s main interest rate risk arises from floating rate
borrowings drawn under bank debt facilities.
Capital management
The Board’s policy is to maintain a strong capital base so
as to maintain investor, creditor and market confidence and
to sustain future development of the business. The Board
continues to monitor group performance so as to ensure an
acceptable return on capital is achieved and that dividends
are able to be provided to ordinary shareholders in the
short term.
The Board continues to review alternatives to ensure
present employees will hold equity in the Company’s
ordinary shares. This is expected to be an ongoing process
establishing long term incentive plans to further align
shareholders and employees interests.
There were no changes in the Group’s approach to capital
management during the year. The Group is not subject to
externally imposed capital requirements.
50
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY .
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51
ANNUAL REPORT 2016
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h
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i
AINSWORTH GAME TECHNOLOGY
7. REVENUE
In thousands of AUD
Sale of goods
Rendering of services
Rental and participation revenue
8. OTHER INCOME
In thousands of AUD
Royalties income
Rental income from lease of machinery
Other income
9. EXPENSES BY NATURE
In thousands of AUD
Changes in raw material and consumables, finished goods and work in progress
Employee benefits expense
Depreciation and amortisation expense
Legal expenses
Evaluation and testing expenses
Marketing expenses
Operating lease expenses
Impairment loss
Other expenses
Note
2016
2015
243,464
213,278
7,670
34,343
6,919
20,446
285,477
240,643
2016
798
76
13
887
2016
101,342
54,540
23,000
1,584
6,919
3,735
3,217
2,170
22,074
218,581
2015
364
76
5
445
2015
77,387
51,938
16,419
1,362
6,271
3,954
2,843
1,245
14,016
175,435
16
10
12,13
27
53
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 10. EMPLOYEE BENEFIT EXPENSES
In thousands of AUD
Wages and salaries
Short term incentives
Contributions to defined contribution superannuation funds
Increase in liability for annual leave
Increase in liability for long service leave
Termination benefits
Equity settled share-based payment transactions
11. FINANCE INCOME AND FINANCE COSTS
In thousands of AUD
Interest income on trade receivables
Interest income on bank deposits
Interest income on investment
Net foreign exchange gain
Finance income
Interest expense on financial liabilities
Finance costs
Net finance income recognised in profit or loss
Note
2016
2015
50,455
43,368
22
22
–
3,350
752
351
35
(403)
54,540
2016
2,785
189
–
4,705
7,679
(689)
(689)
2,973
3,034
97
850
20
1,596
51,938
2015
1,562
1,386
209
25,555
28,712
(46)
(46)
6,990
28,666
54
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY 12. PROPERTY, PLANT AND EQUIPMENT
In thousands of AUD
Cost
Balance at 1 July 2014
Re-classification of inventory to plant and equipment
Additions
Disposals
Effect of movements in foreign exchange
Balance at 30 June 2015
Balance at 1 July 2015
Re-classification of inventory to plant and equipment
Additions
Additions through business combinations
34
Disposals
Effect of movements in foreign exchange
Balance at 30 June 2016
Depreciation and impairment losses
Balance at 1 July 2014
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 30 June 2015
Balance at 1 July 2015
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
Balance at 30 June 2016
Carrying amounts
At 1 July 2014
At 30 June 2015
At 30 June 2016
Note
Land and
buildings
Plant and
equipment
Leasehold
improvements
Total
7,833
–
8,768
–
1,287
17,888
45,054
18,346
4,258
(8,691)
4,853
63,820
17,888
63,820
–
41,385
–
–
612
59,885
–
14
–
–
14
14
663
–
1
18,381
7,669
8,485
(14,277)
634
84,712
21,150
11,331
(2,970)
2,168
31,679
31,679
13,904
(6,693)
(327)
678
38,563
7,833
17,874
59,207
23,904
32,141
46,149
4,291
–
2,473
–
431
7,195
7,195
–
69
–
57,178
18,346
15,499
(8,691)
6,571
88,903
88,903
18,381
49,123
8,485
(2,195)
(16,472)
93
5,162
1,339
149,759
932
850
–
149
1,931
1,931
811
(1,849)
132
1,025
3,359
5,264
4,137
22,082
12,195
(2,970)
2,317
33,624
33,624
15,378
(8,542)
(194)
40,266
35,096
55,279
109,493
Disposals in the table above includes sale of gaming machines previously under participation or rental agreements of $7,078
thousand (2015: $5,582 thousand) at net book value.
Leased plant and equipment
The Group leases plant and equipment and motor vehicles under hire purchase agreements. At the end of each of
these agreements the Group has the option to purchase the equipment at a beneficial price. The leased equipment and
guarantees by the Group secure lease obligations. Acquisition of plant and equipment including computer equipment and
motor vehicles, by means of hire purchase agreements amounted to $nil thousand (2015: $38 thousand). At 30 June 2016,
the net carrying amount of leased plant and equipment was $314 thousand (2015: $618 thousand).
55
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 l
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I
AINSWORTH GAME TECHNOLOGY
Impairment testing for development costs
The carrying amount of the Group’s development costs amounts to $27,089 thousand (2015: $24,217 thousand), comprising of
$23,016 thousand in development costs relating to product development and $4,073 thousand in development costs relating
to online development activities. The impairment testing for these different development costs are performed separately as
they generate or are expected to generate independent cash flows and are therefore allocated to separate cash-generating
units (‘CGUs’). The disclosure relating to the product development costs of $27,089 thousand are outlined below.
Product development costs
The determination of CGUs for the purposes of testing product development costs for impairment is consistent with last financial
year. The Group has maintained that the most reasonable and consistent basis upon which to allocate development costs is
to have the Group’s research and development function (‘Development CGU’) recharge product development costs to the
Group’s other CGUs, which are in line with the Group’s geographic operating segments.
Product development costs include development costs relating to products that are not yet available for sale and as such their
recoverable amount is assessed at the end of each reporting period.
Product development costs are recharged from the Development CGU to individual CGUs, based on the forecasted unit sales
of each individual CGU. Other assets, primarily property, plant and equipment, are allocated to the individual CGUs to which
they relate. Assets that cannot be allocated to individual CGUs are allocated to the minimum collection of CGUs (‘Groups of
CGUs’) to which they can be allocated on a reasonable and consistent basis.
The three main CGUs or Group of CGUs are: Development, Australia and other (comprised of the New South Wales, Queensland,
South Australia, Victoria, Tasmania, Asia, New Zealand, South Africa and Europe individual CGUs), and Americas (comprised of
the North and South America individual CGUs).
The recoverable amount of each CGU or Group of CGUs was estimated based on its value in use. Value in use for each
individual CGU and Group of CGUs was determined by discounting the future cash flows generated from continuing use of the
product development costs over a four year period. Future cash flows are expected to be generated from the sales of machines
and products and are based on the following key assumptions:
CGU/Groups of CGUs
Development
Australia and other
Americas
North America
South America
Average
annual
revenue
growth rate(2)
Discount
rate(1)
26.5%
19.9%
24.1%
21.5%
27.1%
15.7%
19.1%
20.4%
19.1%
22.4%
(1) Discount rates are pre-tax discount rates, which are based on the weighted average cost of capital.
(2) The average annual revenue growth rate presented above is calculated based on forecast revenue for 2017 to 2018, having regard to
Board approved budgets, the Group’s two year business plan, historical experience, actual operating results and strategic initiatives.
Australia and other CGU revenue growths for the third, fourth and fifth year were forecasted at 3%. Americas CGU revenue growths for
the third, fourth and fifth year were forecasted at 18.3%, 16.4% and 14.0% respectively.
57
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 13. INTANGIBLE ASSETS (continued)
The allocation of goodwill, indefinite useful life intangible assets and other assets to the Groups of CGUs are as follows:
CGU/Groups of CGUs
Development
Australia and other
Americas
North America
South America
Goodwill/
indefinite
useful life
intangible
assets
‘$000
Capitalised
development
costs
‘$000
–
23,016
2,436
22,094
22,094
–
–
–
–
–
Other
assets
‘$000
Recoverable
amount
‘$000
6,344
16,547
114,174
40,778
16,240
49,826
108,855
155,430
105,429
50,001
The recoverable amount of the Americas CGU exceeded its carrying amount by $19,162 thousand. The Americas CGU is
particularly sensitive to changes in the following key assumptions:
– An increase of 2.9 percent in the discount rate used would cause the recoverable amount of the CGU to equal its carrying
amount; and
– A 4.1 percent reduction in annual revenue growth rates would cause the recoverable amount of the CGU to equal its carrying
amount.
Impairment testing for goodwill acquired through business combinations
This goodwill relates to the purchase of Nova Technologies during the year. The recoverable amount of this CGU was estimated
based on its value in use, determined by discounting future cash flows to be generated from the continuing use of the CGU.
The key assumptions used in estimation of value in use were as follows:
– The discount rate of 29.6% used is a pre-tax rate, which is based on the weighted average cost of capital;
– Five years of cash flows were included in the discounted cash flow model. A long-term growth rate into perpetuity of 2.5% has
been determined based on growth prospects of this CGU industry and the overall economy; and
– The projected average revenue growth rate over the five years is 24.0% based on past experience, adjusted for anticipated
revenue growth in the Class II markets in which this CGU operates.
As the recoverable amount of the CGU was estimated to be higher than the carrying amount of the Group, no impairment was
considered necessary.
14. EQUITY-ACCOUNTED INVESTEE
On 4 August 2015, the Group converted its convertible note investment for a 40% interest in 616 Digital LLC (“616”) resulting in
a joint venture arrangement. The convertible note investment was previously recognised as a current investment asset. This
conversion has resulted in a de-recognition of this current investment asset, followed by recognition of a non-current asset as
an equity-accounted investee.
616 is an online social platform provider established in Delaware, USA and operates from Romania and Australia. This
arrangement allows both parties to jointly progress development and marketing of social gaming offering on both desktop
and mobile, leveraging the extensive game content library established for land based markets. An agreement has also been
established where the Group has the ability to purchase the remaining 60% interest in 616 at a future date. The investment in
equity accounted investee for the Group comprise the following:
In thousands of AUD
616 Digital LLC
Ownership
30-Jun-16
Ownership
30-Jun-15
Carrying
amount
30-Jun-16
Carrying
amount
30-Jun-15
40%
–
4,831
–
The Group’s share of profit of equity accounted investee is $365 thousand (2015: nil). During the current year, the Group did not
receive dividends from its investments in equity accounted investee.
58
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Summary financial information for the equity accounted investee, not adjusted for the percentage ownership held by the Group,
is as follows:
In thousands of AUD
Non-current assets
Current assets (including cash and cash equivalents)
Current financial liabilities (excluding trade and other payables and provisions)
2016
1
1,865
13
2,575
(2,280)
601
896
2015
–
–
–
–
–
–
–
2016
2015
(29,019)
(33,570)
(594)
9,091
165
9,518
(20,522)
(23,887)
1,087
1,087
(79)
(79)
(19,435)
(23,966)
Income
Expenses
Elimination of upstream purchases
Profit
15. TAXES
Current tax expense
In thousands of AUD
Tax recognised in profit or loss
Current tax expense
Current year
Prior year adjustments
Recognition of R & D tax credits
Deferred tax benefit
Timing differences movement
Total income tax expense
Reconciliation of effective tax rate
In thousands of AUD
Profit before income tax
2016
2016
75,138
2015
2015
94,319
Income tax expense using the Company’s domestic tax rate
(30.00%)
(22,541)
(30.00%)
(28,296)
Effective tax rates in foreign jurisdictions
Non-deductible expenses
Non-assessable income and concessions
Other tax concessions
Prior year adjustments
Recognition of previously unrecognised tax losses and timing
differences
(0.87%)
(7.75%)
12.10%
0.00%
(0.80%)
(656)
(5,824)
9,091
–
(592)
1.45%
(25.87%)
1,088
(19,435)
(1.11%)
(6.25%)
10.09%
1.76%
0.18%
(0.08%)
(25.41%)
(1,046)
(5,892)
9,518
1,663
165
(78)
(23,966)
59
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 15. TAXES (continued)
Recognised deferred tax assets/liabilities
In thousands of AUD
Employee benefits
Provisions
Unrealised foreign exchange gain
Other items
Tax loss carry-forwards
Net tax assets/liabilities
2016
2015
2016
2015
Deferred tax assets
Deferred tax liabilities
374
1,789
–
(738)
144
1,569
711
2,221
–
(305)
144
2,771
2,205
459
(6,139)
(458)
–
1,624
319
(7,930)
479
–
(3,933)
(5,508)
The deductible temporary differences and tax losses do not expire under current tax legislation. R & D non-refundable tax offset
credits are available to be applied against income tax payable in future years and do not expire under current tax legislation.
Management has assessed that the carrying amount of the deferred tax assets of $1,569 thousand should be recognised as
management considers it probable that future taxable profits would be available against which they can be utilised.
16. INVENTORIES
In thousands of AUD
Raw materials and consumables
Finished goods
Stock in transit
Inventories stated at the lower of cost and net realisable value
2016
2015
13,958
34,966
6,793
55,717
12,731
40,688
5,005
58,424
During the year ended 30 June 2016 raw materials, consumables and changes in finished goods and work in progress
recognised as cost of sales amounted to $101,342 thousand (2015: $77,387 thousand).
A re-classification from inventory to property, plant and equipment of $18,381 thousand (2015: $18,346 thousand) was recorded
to reflect gaming products for which rental and participation agreements were entered into during the year.
During the year ended 30 June 2016, the write down of inventories to net realisable value amounted to $30 thousand
(2015: $402 thousand). The write down is included in cost of sales.
60
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY 17. RECEIVABLES AND OTHER ASSETS
In thousands of AUD
Current
Trade receivables
Less impairment losses
Other assets
Amount receivable from director/shareholder controlled entities
Non-current
Trade receivables
Note
2016
2015
26
122,054
(3,349)
118,705
1
94
112,061
(1,762)
110,299
423
–
118,800
110,722
37,903
37,903
36,312
36,312
Information about the Group’s exposure to credit and market risks and impairment losses for trade and other receivables is
included in Note 26.
Leasing arrangements
Included in trade receivables are receivables from gaming machines that have been sold under finance lease arrangement. The
lease payments receivable under these contracts is as follows:
In thousands of AUD
2016
2015
Minimum lease payments under finance leases are receivable as follows:
Within one year
Later than one year but not later than 5 years
Unearned finance income
Within one year
Later than one year but not later than 5 years
The present value of minimum lease payments is as follows:
Within one year
Later than one year but not later than 5 years
Lease receivables are classified as follows:
Within one year
Later than one year but not later than 5 years
3,555
4,105
7,660
313
350
663
3,242
3,755
6,997
3,242
3,755
6,997
2,793
3,103
5,896
232
349
581
2,561
2,754
5,315
2,561
2,754
5,315
61
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 18. CASH AND CASH EQUIVALENTS
In thousands of AUD
Bank balances
Cash deposits
Cash and cash equivalents in the statement of cash flows
2016
26,433
–
26,433
2015
27,573
13,727
41,300
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 26.
18A. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
In thousands of AUD
Cash flows from operating activities
Profit for the period
Adjustments for:
Depreciation
Impairment losses on trade receivables
Amortisation of intangible assets
Net finance income
Loss on sale of property, plant and equipment
Unrealised currency translation movements
Equity-settled share-based payment transactions
Income tax expense
Operating profit before changes in working capital and provisions
Change in trade and other receivables
Change in inventories
Change in other assets
Change in trade and other payables
Change in provisions and employee benefits
Interest paid
Income taxes paid
Net cash from operating activities
Note
2016
2015
12
26
13
11
10
15
17
16
55,703
70,353
15,378
2,094
7,622
12,195
1,245
4,224
(6,990)
(28,666)
891
997
(403)
19,435
94,727
(16,249)
429
191
5,015
(7,288)
76,825
(689)
(23,283)
52,853
678
10,136
1,596
23,966
95,727
(34,251)
(18,109)
(4,773)
812
(1,851)
37,555
(47)
(17,305)
20,203
62
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY 19. CAPITAL AND RESERVES
a. Share capital
In thousands of shares
In issue at 1 July
Exercise of share options
Shares issued under dividend reinvestment plan
In issue at 30 June – fully paid
Ordinary shares
2016
2015
322,339
322,193
227
5,150
146
–
327,716
322,339
i. Ordinary shares
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid. All
shares rank equally with regard to the Company’s residual assets.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at meetings of the Company.
Issue of ordinary shares
During the year, 227 thousand ordinary shares were issued as a result of the exercise of vested options arising from the ESOT.
Options were exercised at a price of $0.225 per option (see Note 23).
b. Nature and purpose of reserve
i. Equity compensation reserve
The equity compensation reserve represents the expensed cost of share options issued to employees.
ii. Fair value reserve
The fair value reserve comprises the cumulative net change in fair value of related party loans and borrowings where interest
is charged at below market rates.
iii. Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of
foreign operations where their functional currency is different to the presentation currency of the reporting entity.
iv. Profits reserve
This reserve is comprised wholly of the profits generated by the Australian entity which would be eligible for distribution as a
frankable dividend.
c. Dividends
The following dividends were declared and paid by the Company for the year:
In thousands of AUD
10.0 cents per qualifying ordinary share (2015: 10.0 cents)
2016
2015
32,245
32,227
After the reporting date, the following dividends were proposed by the board of directors. The dividends have not been
recognised as liabilities and there are no tax consequences.
In thousands of AUD
5.0 cents per qualifying ordinary share (2015: 5.0 cents)
2016
16,386
2015
16,117
63
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 20. EARNINGS PER SHARE
Basic earnings per share
The calculation of basic earnings per share at 30 June 2016 was based on the profit attributable to ordinary shareholders
of $55,703 thousand (2015: $70,353 thousand) and a weighted average number of ordinary shares outstanding during the
financial year ended 30 June 2016 of 323,299 thousand (2015: 322,255 thousand), calculated as follows:
Profit attributable to ordinary shareholders
In thousands of AUD
Profit for the period
Profit attributable to ordinary shareholders
Weighted average number of ordinary shares
In thousands of shares
Issued ordinary shares at 1 July
Effect of shares issued
Weighted average number of ordinary shares at 30 June
Total basic earnings per share attributable to the ordinary equity holders of the
Company
Note
2016
2015
55,703
55,703
70,353
70,353
19
322,339
322,193
960
62
323,299
322,255
$0.17
$0.22
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2016 was based on the profit attributable to ordinary shareholders of
$55,300 thousand (2015: $71,949 thousand) and a weighted average number of ordinary shares outstanding after adjustment
for the effects of all dilutive potential ordinary shares of 326,745 thousand (2015: 324,586 thousand), calculated as follows:
Profit attributable to ordinary shareholders (diluted)
In thousands of AUD
Profit attributable to ordinary shareholders
Amortisation of performance rights (RST)
Profit attributable to ordinary shareholders (diluted)
Weighted average number of ordinary shares (diluted)
In thousands of shares
Weighted average number of ordinary shares at 30 June
Effect of rights and options on issue
Weighted average number of ordinary shares (diluted) at 30 June
Total diluted earnings per share attributable to the ordinary equity holders of the
Company
2016
2015
55,703
(403)
55,300
70,353
1,596
71,949
323,299
322,255
3,446
2,331
326,745
324,586
$0.17
$0.22
64
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY 21. LOANS AND BORROWINGS
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are
measured at amortised cost. For more information about the Group’s exposure to interest rate, foreign currency and liquidity
risk, see Note 26.
In thousands of AUD
Current
Finance lease liabilities
Non-current
Finance lease liabilities
Unsecured bank loan
Secured bank loan
2016
2015
118
53
–
67,724
67,777
175
111
9,139
–
9,250
Terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
In thousands of AUD
Currency
Nominal
interest rate
Year of
maturity
Finance lease liabilities
AUD 0.90-8.39%
Unsecured bank loan
USD LIBOR+0.65%
Secured bank loan
USD LIBOR+0.65%
2018
2016
2018
Total interest-bearing
liabilities
2016
2015
Face
value
180
–
Carrying
amount
171
–
67,724
67,724
Face
value
298
9,139
–
Carrying
amount
286
9,139
–
67,904
67,895
9,437
9,425
The bank loan is secured by fixed and floating charges over identified assets of the Company and certain of its Australia and US
wholly owned subsidiaries, and imposes certain customary financial covenants measured on a six-monthly basis.
Finance lease liabilities
Finance lease liabilities of the Group are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
Future
minimum
lease
payments
2016
125
55
180
Present value
of minimum
lease
payments
Future
minimum
lease
payments
2016
118
53
171
2015
184
114
298
Interest
2016
7
2
9
Present value
of minimum
lease
payments
2015
175
111
286
Interest
2015
9
3
12
The Group leases plant and equipment under finance leases with terms expiring from two to three years. At the end of the lease
term, there is the option to purchase the equipment at a discount to market value, a price deemed to be a bargain purchase
option.
65
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 22. EMPLOYEE BENEFITS
In thousands of AUD
Current
Accrual for salaries and wages
Accrual for short term incentive plan
Liability for annual leave
Liability for long service leave
Non-current
Liability for long service leave
2016
2015
380
131
3,761
2,678
6,950
679
679
752
3,340
3,009
2,101
9,202
905
905
Performance rights programmes (equity-settled)
23. SHARE-BASED PAYMENTS
a. Description of share-based payment arrangements
i.
On 22 July 2013 a new employee incentive plan was established whereby performance rights were granted to all eligible Group
employees under the Rights Share Trust (RST). On 17 March 2015, a further grant on similar terms was offered to all eligible
Group employees under the RST. Under the RST eligible employees were allocated performance rights over ordinary shares
in the Company at nil consideration or exercise price however are dependent on service conditions, vesting conditions and
performance hurdles.
The key terms and conditions related to the grants under these programmes are as follows; all rights are to be settled by the
physical delivery of shares.
Grant date/employee entitled
Rights grant to key management
at 22 July 2013
Rights grant to senior and other employees
at 22 July 2013
Rights grant to key management
at 17 March 2015
Rights grant to senior and other employees
at 17 March 2015
Total rights RST
Number of
instruments
283,021
911,284
458,272
1,794,297
3,446,874
Vesting conditions
Four years service and
performance hurdles from grant
date as per RST below
Four years service and
performance hurdles from grant
date as per RST below
Four years service and
performance hurdles from grant
date as per RST below
Four years service and
performance hurdles from grant
date as per RST below
Contractual life of
options
5 years
5 years
5 years
5 years
To be eligible to participate in the RST the employee was selected by the directors and reviewed by the remuneration and
nomination committee. The RST provide for employees to receive shares for no consideration. Each right is convertible to one
ordinary share. Right holders have no voting or dividend rights. On conversion from right to ordinary shares, the issued shares
will have full voting and dividend rights. The ability to exercise the right is conditional on the continuing employment of the
participating employee.
66
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY All vesting conditions of the share performance rights issued on 22 July 2013 and 17 March 2015 under the RST are detailed
below.
The vesting conditions of the performance rights issued on 22 July 2013 under the RST are as follows:
Date
1 September 2016
1 September 2017
Vesting condition
(% of Rights vesting)
50%
50%
In addition to the vesting conditions on rights granted under the RST, specific performance hurdles relative to Total Shareholder
Return (TSR) relative targets and Earnings per Share (EPS) targets are required to be met as follows:
Vesting date of 1 September 2016:
– 30% vest subject to the TSR target below with a fair value at grant date of $2.4349;
– 70% vest subject to the EPS target below with a fair value at grant date of $3.2375; and
The remaining 50% of the rights vest on 1 September 2017, of which:
– 30% vest subject to the TSR target below with a fair value at grant date of $2.3892; and
– 70% vest subject to the EPS target below with a fair value at grant date of $3.1693.
The vesting conditions of the performance rights issued on 17 March 2015 under the RST are as follows:
Date
17 March 2018
17 March 2019
Vesting condition
(% of Rights vesting)
50%
50%
In addition to the vesting conditions on rights granted under the RST, specific performance hurdles relative to Total Shareholder
Return (TSR) relative targets and Earnings per Share (EPS) targets are required to be met as follows:
Vesting date of 17 March 2018:
– 30% vest subject to the TSR target below with a fair value at grant date of $1.9974;
– 70% vest subject to the EPS target below with a fair value at grant date of $2.3164; and
The remaining 50% of the rights vest on 17 March 2019, of which:
– 30% vest subject to the TSR target below with a fair value at grant date of $1.9290; and
– 70% vest subject to the EPS target below with a fair value at grant date of $2.2289.
The TSR and EPS targets for all performance rights granted are as follows:
Total Shareholder Return (TSR) Relative Targets
TSR rank
Less than 50% percentile
50th percentile
Proportion of TSR rights that vest
0%
50%
Between 50th and 75th percentile
Pro-rata (sliding scale) percentage
At or above 75th percentile
100%
The Comparison Group of Companies for the TSR hurdle is companies in the ASX 300 Index that have the same Consumer
Services GICS industry sector as Ainsworth.
67
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 23. SHARE-BASED PAYMENTS (continued)
EPS Targets
EPS achievement
Less than 8.0% p.a.
8.0% p.a.
10% p.a.
12.5% p.a.
Proportion of EPS rights that vest
0%
25% plus 1.25% for each 0.1% increase in EPS
50% plus 2.0% for each 0.1% increase in EPS
100%
(b) Reconciliation of outstanding share options and rights
ESOT plan
The number and weighted average exercise prices of Group issued share options under ESOT is as follows:
In thousands of options
Weighted
average
exercise price
2016
Number
of options
2016
Weighted
average
exercise price
2015
Number
of options
2015
Outstanding at the beginning of the period
$0.225
227
$0.225
Forfeited during the period
Cancelled during the period
Exercised during the period
Granted during the period
Outstanding at the end of the period
Exercisable at the end of the period
–
–
$0.225
(227)
$0.225
–
–
–
$0.225
373
–
–
(146)
–
227
227
The weighted-average share price at the dates of exercise for share options exercised in 2016 was $2.35 (2015: $2.81).
ASOT plan
The share options granted under the ASOT to Australian employees on 1 March 2011 totalled 9,899,182. During the year no
previously granted share options were cancelled and 300,764 were exercised with no share options outstanding as at 30 June
2016. The weighted-average share price at the dates of exercise for share options exercised in 2016 was $2.34 (2015: $3.22).
RST plan
The rights granted under the two grants under the RST to all eligible Group employees totalled 4,046,289. During the year
490,791 were cancelled with 3,446,874 rights outstanding as at 30 June 2016. No rights were exercisable as at 30 June 2016.
(c) Measurement of fair values
The fair value of the performance rights granted on 22 July 2013 under the RST were as follows:
Fair value at grant date
– Vesting date 1 September 2016
– Vesting date 1 September 2017
TSR Target
EPS Target
$2.43
$2.39
$3.24
$3.17
68
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY The inputs used in the measurement of the above fair values at grant date of the equity settlement share based payment plan
under the RST were as follows:
Share price at grant date
Exercise price
Expected volatility
Expected life
Expected dividends
Risk-free interest rate (based on Treasury Bonds)
The fair value of the performance rights granted on 17 March 2015 under the RST were as follows:
Fair value at grant date
– Vesting date 17 March 2018
– Vesting date 17 March 2019
RST Plan
$3.46
–
40.3%
5 years
2.1%
2.6%
TSR Target
EPS Target
$2.00
$1.93
$2.32
$2.23
The inputs used in the measurement of the above fair values at grant date of the equity settlement share based payment plan
under the RST were as follows:
Share price at grant date
Exercise price
Expected volatility
Expected life
Expected dividends
Risk-free interest rate (based on Treasury Bonds)
RST Plan
$2.60
–
24.1%
5 years
3.9%
2.5%
The estimate of the fair value of the services received is measured based on the Black Scholes Merton model. The fair value
of services received in return for share options and rights granted are measured by reference to the fair value of share options
and rights granted. The contractual life of the option and right is used as an input into this model. Expectations of early exercise
are incorporated into these models. The expected volatility is based on the historic volatility (calculated based on the weighted
average remaining life of the share options or rights), adjusted for any expected changes to future volatility due to publicly
available information.
d. Expense recognised in profit or loss
For details on the related employee benefit expenses, see Note 10.
69
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 24. TRADE AND OTHER PAYABLES
In thousands of AUD
Current
Trade payables
Other payables and accrued expenses
Amount payable to director/shareholder controlled entities
2016
2015
11,496
18,649
153
30,298
8,008
21,129
254
29,391
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 26.
25. PROVISIONS
In thousands of AUD
Balance at 1 July 2015
Provisions made during the year
Provisions used during the year
Balance at 30 June 2016
Service/
warranties
738
746
(738)
746
Legal
16
67
(16)
67
Total
754
813
(754)
813
26. FINANCIAL INSTRUMENTS
Credit risk
Exposure to credit risk
Trade and other receivables
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure
to credit risk at the reporting date was:
In thousands of AUD
Receivables
Note
17
Carrying amount
2016
156,608
156,608
2015
146,611
146,611
The Group’s gross maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
In thousands of AUD
Australia
Americas
Europe
New Zealand
Asia
2016
27,923
124,199
832
2,059
4,944
2015
39,848
98,781
241
1,991
7,512
159,957
148,373
The Group’s concentration of credit risk arises from its two most significant receivable amounts represented by a customer
in North America and a customer in Latin America. They account for $14,571 thousand (2015: $5,422 thousand) and $7,781
thousand (2015: $7,843 thousand) of the trade receivables carrying amount at 30 June 2016 respectively.
70
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Cash and cash equivalents
The Group held cash of $26,433 thousand at 30 June 2016 (2015: $27,573 thousand) and no cash deposits at 30 June 2016
(2015: $13,727 thousand), which represents its maximum credit exposure on these assets. The cash and cash deposits are held
with bank and financial institution counterparts, which are rated AA- to A-, based on rating agency Standard & Poor ratings.
Impairment losses
The aging of the Group’s trade receivables at the reporting date was:
In thousands of AUD
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 121 days to one year
More than one year
Gross
2016
Impairment
2016
Gross
2015
Impairment
2015
103,832
26,456
22,671
980
6,018
159,957
–
–
209
8
3,132
3,349
102,305
26,120
12,383
3,733
3,832
148,373
–
–
–
1,376
386
1,762
2015
2,105
(1,864)
1,245
276
1,762
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
In thousands of AUD
Balance at 1 July
Impairment loss written off
Provision during the year
Effect of exchange rate fluctuations
Balance at 30 June
2016
1,762
(566)
2,094
59
3,349
The provision of $2,094 thousand (2015: $1,245 thousand) was recognised in other expenses in the income statement.
Based on historic default rates and current repayment plans in place, the Group believes that apart from the above, no impairment
is necessary in respect of trade receivables not past due or on amounts past due as these relate to known circumstances that
are not considered to impact collectability.
At 30 June 2016, an impairment loss of $1,504 thousand was brought to account in relation to an amount receivable from a Latin
American customer that has demonstrated poor payment history. The remaining balance net of provisioning for this customer
relates to a negotiated repayment plan.
The allowance for impairment losses in respect of receivables is used to record impairment losses unless the Group is satisfied
that no recovery of the amount owing is possible; at that point the amounts are considered irrecoverable and are written off
against the financial asset directly.
71
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 26. FINANCIAL INSTRUMENTS (continued)
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements:
30 June 2016
In thousands of AUD
Non-derivative financial liabilities
Finance lease liabilities
Unsecured bank loan
Secured bank loan
Trade and other payables
Carrying
amount
171
–
67,724
30,298
98,193
Contractual
cash flows 6 mths or less
6-12 mths
1-2 years
2-5 years
(180)
–
(67,724)
(30,298)
(98,202)
(94)
–
–
(30,298)
(30,392)
(31)
–
–
–
(31)
(55)
–
–
–
–
–
(67,724)
–
(55)
(67,724)
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different
amounts.
30 June 2015
In thousands of AUD
Non-derivative financial liabilities
Finance lease liabilities
Unsecured bank loan
Secured bank loan
Trade and other payables
Carrying
amount
286
9,139
–
29,391
38,816
Contractual
cash flows 6 mths or less
6-12 mths
1-2 years
2-5 years
(153)
(30)
(297)
(9,139)
–
(29,391)
(38,827)
–
–
(29,391)
(29,544)
(108)
(9,139)
–
–
–
–
–
(30)
(9,247)
Currency risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the AUD.
The Group monitors and assesses under its Treasury Risk policy and facilities available whether hedging of all trade receivables
and trade payables denominated in a foreign currency from time to time is considered appropriate. The Group uses foreign
currency call options to hedge its foreign currency risk. No foreign currency call options were utilised during the year.
Exposure to currency risk
The Group’s significant exposures to foreign currency risk at balance date were as follows, based on notional amounts:
2016
2015
USD
Euro
NZD
GBP
USD
Euro
125,642
40
2,052
24
102,593
–
–
–
–
–
–
(9,139)
–
–
(67,724)
(16,691)
(104)
(179)
(2)
(13,961)
(120)
(270)
NZD
1,281
–
–
–
–
–
41,227
(64)
1,873
22
79,493
(120)
1,011
In thousands of AUD
Trade receivables
Unsecured bank loan
Secured bank loan
Trade payables and other payables
Net exposure in statement of
financial position
72
(6)
–
–
–
(6)
GBP
56
–
–
(42)
14
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY The following significant exchange rates applied during the year:
USD
Euro
NZD
GBP
Average rate
Reporting date spot rate
2016
2015
2016
2015
0.7286
0.6561
1.0909
0.5162
0.8377
0.6965
1.077
0.5429
0.7426
0.6699
1.0489
0.5549
0.7680
0.6866
1.1294
0.4885
Sensitivity analysis
In managing currency risks the Group aims to reduce the impact of short-term fluctuations on the Group earnings. Over the
longer-term, however, permanent changes in foreign exchange will have an impact on profit/(loss).
A 10 percent strengthening of the Australian dollar against the following currencies at 30 June 2016 would have increased
(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain
constant. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably
possible at the end of the reporting period.
Effect In thousands of AUD
30 June 2016
USD
Euro
NZD
GBP
HKD
30 June 2015
USD
Euro
NZD
GBP
HKD
Equity Profit or (loss)
(21,515)
(17,958)
6
(170)
(2)
2
6
(170)
(2)
2
(10,900)
(8,057)
11
(92)
(1)
2
11
(92)
(1)
2
A 10 percent weakening of the Australian dollar against the following currencies at 30 June would have increased (decreased)
equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. This
analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end
of the reporting period.
73
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 26. FINANCIAL INSTRUMENTS (continued)
Effect In thousands of AUD
30 June 2016
USD
Euro
NZD
GBP
HKD
30 June 2015
USD
Euro
NZD
GBP
HKD
Equity Profit or (loss)
26,299
21,952
(7)
208
2
(2)
(7)
208
2
(2)
13,322
9,848
(13)
112
2
(2)
(13)
112
2
(2)
Fair values
The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position,
are as follows:
Carrying
amount
2016
Fair value
2016
Carrying
amount
2015
Fair value
2015
156,703
156,703
26,433
183,136
147,034
41,300
147,034
41,300
188,334
188,334
Fair value
2016
Carrying
amount
2015
Fair value
2015
26,433
183,136
Carrying
amount
2016
30,298
30,298
–
–
67,724
67,724
171
171
29,391
9,139
–
286
29,391
9,139
–
286
98,193
98,193
38,816
38,816
In thousands of AUD
Assets carried at amortised cost
Receivables and other assets
Cash and cash equivalents
In thousands of AUD
Liabilities carried at amortised cost
Trade and other payables
Unsecured bank loan
Secured bank loan
Finance leases
Note
17
18
24
21
21
21
74
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Estimates of fair values
The methods used in determining the fair values of financial instruments are discussed in Note 4.
Interest rates used for determining fair value
The interest rates used to discount estimated cash flows, where applicable, are based on the government yield curve as of 30
June 2016 plus an adequate constant credit spread and are as follows:
Receivables
Unsecured bank loan
Secured bank loan
Leases
2016
2015
6.00% - 9.64%
6.00% - 9.64%
–
LIBOR + 0.65%
LIBOR + 0.65%
–
0.90% - 8.39% 0.90% - 8.39%
Interest rate risk
A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased/(decreased)
profit or loss. An increase in 100 basis points would lead to a decrease in profit by $264 thousand and a decrease in 100 basis
points would lead to an increase in profit by $264 thousand. This analysis assumes that all other variables, in particular foreign
currency exchange rates, remain constant.
27. OPERATING LEASES
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
More than five years
2016
2,338
8,315
–
10,653
2015
2,470
8,983
1,190
12,643
The Group leases a number of warehouse and office facilities under operating leases. The leases typically run for a period
of 1-10 years, with an option to renew the lease after that date. Lease payments are increased every year either by annual
increases of 2-4% per annum, or by market rent reviews at stipulated dates. None of the leases include contingent rentals.
During the year $3,217 thousand was recognised as an expense in profit or loss in respect of operating leases (2015: $2,843 thousand).
The warehouse and office lease are combined leases of land and buildings. Since the land title does not pass, the rent paid to
the landlord for the building is increased to market rent at regular intervals, and the Group does not participate in the residual
value of the building, it was determined that substantially all the risks and rewards of the building are with the landlord. As such,
the Group determined that the leases are operating leases.
75
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 28. CAPITAL AND OTHER COMMITMENTS
In thousands of AUD
Plant and equipment
Contracted but not yet provided for and payable:
Within one year
Employee compensation commitments
Key management personnel
2016
2015
899
2,856
Commitments under non-cancellable employment contracts not provided for in the financial
statements and payable:
Within one year
1,902
2,466
29. RELATED PARTIES
The following were key management personnel of the Group at any time during the reporting period and unless otherwise
indicated were key management personnel for the entire period:
Non-executive directors
Current
Mr GJ Campbell
Mr MB Yates
Mr CJ Henson
Ms HA Scheibenstock (subject to regulatory approval)
Executive directors
Mr LH Ainsworth (Executive Chairperson)
Mr DE Gladstone (Executive Director and Chief Executive
Officer, Ainsworth Game Technology Limited)
Executives
Current
Mr ML Ludski (Chief Financial Officer and Company Secretary,
Ainsworth Game Technology Limited)
Mr V Bruzzese (General Manager Technical Services,
Ainsworth Game Technology Limited)
Mr I Cooper (General Manager, Manufacturing, Ainsworth
Game Technology Limited)
Former
Mr S Clarebrough (Group General Manager, Strategy and
Development, Ainsworth Game Technology Limited) resigned
on 22nd December 2015 and ceased to be a key management
personnel from this date.
Key management personnel compensation
The key management personnel compensation included in ‘employee benefit expenses’ (see Note 10) is as follows:
In AUD
Short-term employee benefits
Post-employment benefits
Share based payments
Other long term benefits
76
2016
2015
3,111,533
3,687,309
267,799
(41,171)
319,957
401,917
167,705
186,640
3,505,866
4,595,823
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Individual directors and executives compensation disclosures
Information regarding individual directors and executives compensation and some equity instruments disclosures as permitted
by Corporations Regulations 2M.3.03 and 2M.6.04 is provided in the Remuneration Report section of the Directors’ Report.
Apart from the details disclosed in this note, no director has entered into a material contract with the Group since the end of the
previous financial year and there were no material contracts involving directors’ interests existing at year-end.
Other key management personnel transactions
A number of key management persons, or their related parties, hold positions in other entities that result in them having control
or significant influence over the financial or operating policies of those entities.
A number of those entities transacted with the Group during the year. Other than as described below the terms and conditions
of the transactions with key management persons and their related parties were no more favourable than those available, or
which might reasonably be expected to be available, on similar transactions to non-director related entities on an arm’s length
basis.
The aggregate value of transactions and outstanding balances relating to key management personnel and their related parties
were as follows:
In AUD
Note
2016
2015
2016
2015
Transactions value
year ended 30 June
Balance receivable/
(payable) as at
30 June
Key management
person
Transaction
Mr LH Ainsworth
Leased plant and equipment and
other costs
Mr LH Ainsworth
Sales revenue
Mr LH Ainsworth
Purchases and other charges
payments made on behalf of the
Company
Mr LH Ainsworth Other charges payments made on
behalf of Mr LH Ainsworth
Mr LH Ainsworth Operating lease rental costs
(i)
(ii)
(ii)
(ii)
(iii)
62,400
62,400
1,511,963
1,381,806
99,857
174,617
–
–
–
93,955
–
93,955
–
48,974
–
–
1,580,980
1,582,824
(153,133)
(254,912)
(i)
(ii)
The Company leased associated plant and equipment from an entity controlled by Mr LH Ainsworth on normal commercial terms and
conditions.
Transactions were with Ainsworth (UK) Ltd and Associated World Investments Pty Ltd (AWI), entities controlled by Mr LH Ainsworth.
These sales are on normal commercial terms i.e. at arm’s length, but purchases are on a direct recharge. On 15th April 2016,
Mr LH Ainsworth sold his 100% interest in Ainsworth(UK) held by AWI to Novomatic AG. Any subsequent transaction between the Group
and Ainsworth(UK) ceased to be a related party transaction effective from this date. AWI remains a related party of Mr LH Ainsworth
and the Group.
(iii) Operating leases rental costs of the premises at Newington from an entity controlled by Mr LH Ainsworth on normal commercial terms
and conditions.
In addition to the transactions above, AGT Pty Argentina S.R.L. was incorporated in FY13 with the shareholding currently held
in trust by Mr D Gladstone and an officer of Ainsworth Game Technology Inc. on behalf of the Group. This shareholding is in the
process of being transferred and was originally structured to facilitate the incorporation within Argentina.
77
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016 29. RELATED PARTIES (continued)
Amounts receivable from and payable to key management personnel and their related parties at reporting date arising from
these transactions were as follows:
In AUD
2016
2015
Assets and liabilities arising from the above transactions
Current receivables and other assets
Amount receivable from director/shareholder controlled entities
93,955
48,974
Current trade and other payables
Amount payable to director/shareholder controlled entities
153,133
254,912
30. GROUP ENTITIES
Parent entity
Ainsworth Game Technology Limited
Subsidiaries
AGT Pty Ltd
AGT Pty Mexico S. de R.L. de C.V.
AGT Pty Peru S.A.C.
AGT Pty Argentina S.R.L.
AGT Pty Colombia SAS
AGT Alderney Limited
Ainsworth Game Technology Inc
Ainsworth Interactive Pty Ltd
AGT Service Pty Ltd
AGT Service (NSW) Pty Ltd
J & A Machines Pty Ltd
RE & R Baker & Associates Pty Ltd
Bull Club Services Pty Ltd
Ownership Interest
Country of
incorporation
2016
2015
Australia
Australia
Mexico
Peru
Argentina
Colombia
Alderney
USA
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
100%
100%
100%
100%
100%
100%
100%
100%
31. SUBSEQUENT EVENTS
After the reporting date, the Company declared a franked dividend of 5.0 cents per ordinary share amounting to $16,386,000
with an expected payment date of 7 November 2016. The financial effect of this dividend has not been brought to account in
the financial statements for the year ended 30 June 2016 and will be recognised in subsequent financial reports.
Other than the matters discussed above, there has not arisen in the interval between the end of the financial year and the
date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the
Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group,
in future financial years.
78
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY
32. AUDITOR’S REMUNERATION
In AUD
Audit and review services
Auditors of the Company – KPMG
Audit and review of financial statements
Other regulatory audit services
Other services
Auditors of the Company – KPMG
2016
2015
255,000
260,000
35,000
30,000
290,000
290,000
In relation other assurance, due diligence and taxation
36,077
707,759
33. PARENT ENTITY DISCLOSURES
As at and throughout the financial year ended 30 June 2016 the parent entity of the Group was Ainsworth Game Technology
Limited.
In thousands of AUD
Result of parent entity
Profit for the year
Total comprehensive income for the year
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of parent entity comprising of:
Share capital
Equity compensation and translation reserve
Fair value reserve
Profit reserves
Accumulated losses
Total equity
Parent entity capital commitments for acquisitions of
property, plant and equipment
In thousands of AUD
Plant and equipment
Contracted but not yet provided for and payable:
Within one year
2016
2015
52,235
52,235
68,982
68,982
156,641
179,743
348,926
329,468
37,573
42,346
39,086
54,996
193,754
182,360
9,786
9,684
113,730
(20,374)
9,061
9,684
96,913
(23,546)
306,580
274,472
2016
2015
899
2,856
79
Notes to the Financial Statements (continued)for the year ended 30 June 2016ANNUAL REPORT 2016
34. BUSINESS COMBINATIONS
On 15 January 2016 the Group acquired 100% of the equity in US based privately-held Nova Technologies LLC (“Nova”) at a
purchase price of USD38 million. Nova is an innovative manufacturer and proven performer of Class II games and systems in
North America. Nova provides the Group with immediate presence in the US Class II markets and offers an opportunity for
growth within the Americas with an expanded library of products to an increasingly large addressable market.
Details of the purchase consideration, the net assets acquired and goodwill are as follows:
In thousands of AUD
Purchase consideration, fully paid in cash
The fair value of assets and liabilities recognised as a result of the acquisition are as follows:
Cash
Receivables
Inventory
Property, plant and equipment
Intangible assets: trade names and trademarks
Intangible assets: developed technology
Intangible assets: software
Intangible assets: customer relationships
Other assets
Payables
Net identifiable assets acquired
Add: goodwill
Net assets acquired
54,714
490
1,411
224
8,485
743
7,365
3,263
11,838
3
(1,030)
32,792
21,922
54,714
The goodwill is attributable to key employees, tax benefits and synergies from combining operations with Nova. The total
amount of goodwill that is expected to be deductible for tax purposes is $21,922 thousand.
i. Acquired receivables
The fair value of total trade receivables on acquisition was $1,411 thousand. The gross contractual amounts receivables was
$1,411 thousand. It is estimated that all receivables as at the date of acquisition will be collected.
ii. Acquisition related costs
The total acquisition related costs amounting to $581 thousand have been recognised as an expense in the statement of
comprehensive income, within the ‘other expenses’ line item.
iii. Revenue and profit contribution
The acquired business contributed revenues of $6,153 thousand and a net profit of $1,550 thousand to the Group for the period
from 15 Jan 2016 to 30 June 2016.
If the acquisition had occurred on 1 July 2015, the consolidated pro-forma revenue and net profit for the year ended 30 June
2016 would have been $11,930 thousand and $2,484 thousand respectively.
iv. Purchase consideration - cash outflow
In thousands of AUD
Outflow of cash to acquire subsidiary
Less: Cash acquired
Outflow of cash - investing activities
80
54,714
(490)
54,224
Notes to the Financial Statements (continued)for the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY 1.
In the opinion of the directors of Ainsworth Game Technology Limited (the ‘Company’):
a.
the consolidated financial statements and notes that are set out on pages 36 to 80 and the Remuneration report in
sections 15.1 to 15.4 in the Directors’ report, are in accordance with the Corporations Act 2001, including:
i
giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its performance for the financial
year ended on that date; and
b.
ii complying with Australian Accounting Standards and the Corporations Regulations 2001; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
2.
3.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief
executive officer and chief financial officer for the financial year ended 30 June 2016.
The directors draw attention to Note 2(a) to the consolidated financial statements, which includes a statement of compliance
with International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
LH Ainsworth
Executive Chairman
Dated at Sydney this 23rd day of August 2016.
81
Directors’ Declarationfor the year ended 30 June 2016ANNUAL REPORT 2016
82
Independent Auditor’s Reportfor the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Independent Auditor’s Report
83
Independent Auditor’s Reportfor the year ended 30 June 2016ANNUAL REPORT 2016 84
Lead Auditor’s Independent Declarationfor the year ended 30 June 2016AINSWORTH GAME TECHNOLOGY Corporate Directory
Securities Exchange Listing
The Company is listed on the
Australian Securities Exchange.
The Home Exchange is Sydney.
CODE: AGI
Websites
www.agtslots.com.au (Australiasia)
www.agtslots.com (The Americas)
Share Registry
Computershare Investor Services
Pty Ltd
Level 3, 60 Carrington Street,
Sydney NSW Australia 2001
Tel:
1300 850 505 (within Aust)
+61 3 9415 4000 (outside Aust)
Fax: +61 3 9473 2500
Auditor
KPMG
Tower Three
International Towers Sydney
300 Barangaroo Avenue
Sydney NSW Australia 2000
Tel: +61 2 9335 7000
Fax: +61 2 9299 7001
Other Information
Ainsworth Game Technology Limited,
incorporated and domiciled in
Australia, is a publicly listed company
limited by shares.
THE AMERICAS
Nevada
5800 Rafael Rivera Way,
Las Vegas, NV 89118
Tel: +1 (702) 954-3000
Fax: +1 (702) 954-3001
Email: enquiries@agtslots.com
Florida
1011 SW 30th Avenue,
Deerfield Beach, FL 33442
Tel: +1 (954) 944-3800
Fax: +1 (954) 317-5555
Email: enquiries@agtslots.com
ASIA
Macau
Mr Jim Tang
Key Account Sales Executive
Tel: +853 6648 5180
Email: jtang@agtslots.com
Malaysia
Mr Alfred Hwee
Key Account Sales Executive
Tel: +65 9667 1375
Email: awhee@agtslots.com
CORPORATE DIRECTORY
Executive Chairman
Mr LH Ainsworth
Independent Non-Executive
Directors
Mr GJ Campbell
Mr MB Yates
Mr CJ Henson
Ms HA Scheibenstock
Chief Executive Officer
and Executive Director
Mr DE Gladstone
Company Secretary
and Chief Financial Officer
Mr ML Ludski
OFFICES
AUSTRALIA
Corporate and Head Office
10 Holker Street,
Newington NSW Australia 2127
Tel: +61 2 9739 8000
Fax: +61 2 9648 4327
Email: enquiries@agtslots.com
Queensland
Unit 5 / 3990 Pacific Highway
Loganholme QLD Australia 4129
Tel: +61 7 3209 6210
Fax: +61 7 3209 6510
Email: gcoleman@agtslots.com
South Australia
Mr Andrew Hely
National Sales Manager
Tel: +61 0407 909 969
Email: ahely@agtslots.com
Victoria
Mr Wayne Flood
State Sales Manager
Tel: +61 0419 551 454
Email: wflood@agtslots.com
85
ANNUAL REPORT 2016
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10 Holker Street, Newington
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www.agtslots.com
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